First - lvs_eeyore is right. The Hilton is the ONLY Downtown Disney Hotel that will offer Extra Magic Hour privleges.
Second, I'm always in the minority, but I will stick up for the Downtown Disney hotels. I've stayed at the Courtyard (twice) and the Hotel Royal Plaza. Since they all share the same transportation system, I can tell you that I've never had a problem with the transportation. Two teens could VERY easily get to the Magic Kingdom from the Downtown Disney hotels. All they have to do is go to the designated bus stop, and hop on the bus marked Magic Kingdom. It will take them to the Ticket and Transportation Center, and from there, they'll take a monorail or the ferry to the Magic Kingdom.
The Hilton is having a special through
Dreams Unlimited for $89/night. Two rooms should serve your family's needs, and including taxes, it should work out to a little under $1400 for 7 nights.
Or, if you don't really need the Extra Magic Hour, the Doubletree is having a special (again through Dreams Unlimited) for $79/night. That works out to about $1200 for a week including tax for two rooms, and the suites are HUGE.
I personally would steer clear of the Disney resorts for your needs. The All Stars and Pop Century are inexpensive (as far as Disney's pricing scheme), but they are not at all spacious. And the moderates, while affording you more space, will be over $2000 including taxes unless you can get a discount (which for room only reservations are few and far between).
Good luck!
