I too am hopeful that character dining will be back for 2022. Crystal Palace is great - especially for kids of that age. We always did lunch there because the morning hours are so great to get rides in before the park gets crowded. It also gave my kids a nice midday break. Another poster suggested making a late breakfast reservation - I think that's a good way to still get some early am ride time and then have your Mickey waffles.
I expect character dining will be back by 2022 and definitely recommend Crystal Palace. We usually book an 8:05 slot to be finished before the park officially opens, but with the change to opening each park 30 minutes early for resort guests (not yet started, but coming), we might have to rethink that.