Buckle Up.
I'm probably the biggest supporter of Disney during Christmas week. A quick background - like your family, mine grew up on Disney. I'm 26, my sister is 31 and my parents are in their 60s. Back in 07/08, my dad was diagnosed with cancer. It was a long, drawn-out battle that he won. After his surgeries and he went into remission, we wanted to celebrate. We'd always been to Disney during the summer, but he wanted to try it for Christmas.
Looking back, our planning was terrible. We had ADRs but no dining plan (which you don't necessarily need). We didn't plan out our parks or schedule anything (outside ADRS). It wasn't a mess, but we've learned a lot. We loved it so much that we went back in 2010, skipped 2011 due to a wedding and my impending job hunt, and returned in 2013, 2014 and this past Christmas.
Is it packed?
Yes. Main Street on Christmas Day is a nightmare. It's crowded with wall-to-wall people and wait times for popular rides can surpass 2 hours.
But, planning your day can go a long way. For instance, my family quickly learned that while Magic Kingdom is CRAZY crowded on Christmas Day, Animal Kingdom is not. Now, we'd never break tradition. We love MK on Christmas Day. So, we arrive early for morning EMH. We also learned that the park doesn't typically get crowded until 10 or 11am. We go on as many rides as possible and schedule our FP+s for 11am, 12pm and 1pm before heading back to the resort for a break.
Parks getting shut down
Yes and no. Parks will see phased closures. However, if you're staying on-site, you're at a huge advantage. I've only witnessed MK see a Phase 3 closure (usually 12/25, 12/26 and 12/31). I think MK only hit a Phase 4 closure once - back in 2007. Only at a Phase 4 closure are on-site guests turned away.
Is it as terrible as you've heard?
A Disney vacation is only as terrible as you make it. If you go in there expecting to skate through the park and see and do everything, you're gonna be disappointed. If you go in there with the understanding that it's gonna be crowded and brace for the worst, you're gonna have a ball!
You're at a tremendous advantage having been to the park so much. I wouldn't recommend Christmas week for first timers or even people going for their 2nd or 3rd time. However, you've already seen and done everything! If you miss a ride or two, would it really kill you? You also have an older family which is awesome. Magic Kingdom will do at least one late-night EMH (1am-3am). Most of the families will go home after the last parade/fireworks show and the park really empties out by 2am. It's an awesome opportunity to see the park without the crowds and go on your favorite rides at a much reduced wait time.
The whole food area thing is false. Will it be crowded during lunchtime and dinnertime? Absolutely. But we've never had a problem getting a QS table. Now - you NEED to be online at 7am the second your 180-day window opens. ADRs will go QUICK, but this notion that you'll wait to go to the bathroom or for a table at a QS is wrong - however, it is true on NYE.
I'd say do it. It's expensive, it's crowded and can be stressful, but nothing beats it. My sister is a teacher, my dad is retired and my mom has a ton of PTO days. I'm really the only one stuck using 1/3 of my days for the trip.. but, I wouldn't have it any other way. The way I see it - all my friends wake up on 12/26 and go back about their normal lives. They go out, they go back to work, etc. Me? I wake up and go to the parks. We all lead busy lives, so having a week-long vacation and spending what feels like a week-long holiday together is awesome.
My blog and free digital book is at survivedisxmas.com if you wanna learn more.