If you want to hit the museums (and you should), a
CityPass would really be worth it. Just the Shedd Aquarium alone will run you at least $100 for a family of four and that's without food and special exhibits like the dolphin presentation or shark exhibit. Right off the lake is Museum Campus, which includes the Field Museum (dinosaurs, Egyptian mummies, etc), the Shedd, and the Adler Planetarium. Nearby on Michigan Avenue is the Art Institute. MSI (Museum of Science and Industry - very hands-on and HUGE) is NOT on Museum Campus, but is much further south off of Lake Shore Drive. You can't walk there so you'll have to cab it, but it is an amazing museum (as all the Chicago ones are!). Also, Navy Pier has the Children's Museum and the giant ferris wheel, as well as a bunch of shops and restaurants.
For free: don't miss Buckingham Fountain or Millenium Park. I've lived most of my life in the Chicago burbs and I'm still impressed by both. Also, a walk along the lakeshore can help you beat the heat of the often-sultry Chicago summers and you can grab a Chicago-style Vienna Beef dog for cheap but tasty eats.
There's lots of shopping along the Mag Mile (Michigan Ave) and there's always the Willis Tower (which will always be the Sears Tower to me!). Don't miss that, as they now have "The Ledge" on the Skydeck. 103 floors up and you can walk out onto a plexiglass bumpout for an exhilarating look down at the city. Wish I could help with hotel info, but since I've always lived so close to the city I've never stayed down there.
If you decide to come, you'll enjoy it. As you can tell, I love Chicago!
ETA: Oh, and as for transportation, there's the El, buses, and the Metra train if you are going to leave the city to go to Brookfield Zoo (fantastic zoo!). I think there is even a free shuttle to get you to the major tourist attractions around town, but don't quote me on that. The CTA has been having some budget issues lately so maybe that free shuttle isn't so free anymore.