I really don't want to act like a Disney snob, but you simply will not get the same experience if you stay off property! Disney is blessed with the ability to submerge its guests in the magic so completely! You will never understand unless you stay there! I have 3 children myself, I know that space is nice, but Disney ambiance is nicer! You can always look into the villas (renting points from an owner is even an option). There are several resorts that comfortably fit a family of 5. We stayed for 10 days recently at Port Orleans Riverside, a moderate resort so it did not break the bank. We never felt on top of each other! If you want your DH to come back year after year, you may need to allow him to experience Disney from the inside out! Total submersion!
DH
DD11
DD8
DD6
ME
I disagree that stay onsite increases the magic. My trip to WDW occurred in July 1995 where I stayed onsite. I swore I would never come back it was such a miserable experience. There was no magic during the trip. It was hot, I was at the mercy of Disney transportation, I walked into a theme park without great expectations but the first thing I walked into the Magic Kingdom was a shopping center, and when I finally got to the rides, I had to wait an hour or more. Where was the magic, where was the fun?
My friend who recommended going to Disney suggested going at a different time of year. Since I like Christmas, I went the middle of December staying offsite. I had a great time and I have been going to Orlando every year since. I have stayed both on- and offsite during these periods. Staying onsite during the Christmas season does add something special to the vacation but my offsite experiences have also been great.
My suggestion would be to determine what are the plans for the vacations.
Do you plan to get up first thing in the morning and return late at night? If so, it really doesn't matter where you stay and I would look to reduce the cost of the room.
What size of unit do you require? If you are comfortable staying in a hotel room (I'm not), then a hotel unit will work but if you require additional room, there are other alternatives available that may suit your needs better.
Do you wish time to relax? You have many options here but you might want to look at the amenities that are available. If the only thing that the resort has is a pool, bar, and eating facilities, then almost any place will do. But if you want more, then you may look at other options such as timeshares or rental homes. I would recommend allowing some time away from the parks to allow the children to recoup.
Do you wish to eat out or do you plan to cook? Again, if you eat out, it doesn't matter where you stay but if you plan to cook, you may wish to look for a kitchenette room, rental homes, or timeshares.
Do you wish to be onsite or offsite? Onsite takes care of itself as there are limited options (although numerous Disney and Disney-authorized hotels). Offsite, there are more options including the type of units and how far from Disney do you wish to be.
Are you planing on doing anything other than Disney? While you can do the others while staying at Disney, there are hotels/timeshares/rental homes that are located close to the tourist areas. I enjoy Universal/Islands of Adventure and Seaworld. They may be something to consider.
Enjoy your vacation no matter what you choose. I really don't think there is a bad choice although some may be better than others.