My oldest is a little daredevil, so I'm sure she'll be fine on any ride they'll let her on, but I'm more concerned about the "but that's for babies" factor when it comes to the character rides. Fingers crossed that it won't be an issue as others on here have said.
What's a dark ride? and rope drop? Is splash zone a waterpark?
I'm assuming the Magic Morning is a pass? does that come with the standard pass or is it an extra?
Most Disney rides, although child-friendly, are not baby-ish or 'kiddie rides'. I don't think you'll have a problem with your oldest

There are actually a number of attractions which aren't themed on Disney movies at all. And there shouldn't be too much bag minding involved for you either
Looks like you've found out about dark rides on your own. Yes, they are all similar in style to Monsters, Inc. Basically a ride vehicle going through scenes with animatronics and music. Toy Story Mania and Buzz Lightyear are the interactive ones. In Toy Story Mania, you basically go between 3D screens where you play carnival games. In Buzz Lightyear you shoot at targets. Both are a lot of fun and definitely worth doing if your kids are familiar with Toy Story. Both are mild enough for anyone too - my mum did both.
Rope drop refers to park opening. Usually they'll open the main gates about half an hour before the park actually opens. There is limited access to the park during this time, which is 'roped off' at various points. You can be one of the first ones through if you go and line up at the rope, which is put away at the official opening time. If you're doing rope drop at DCA and aiming for Toy Story Mania (which I highly recommend), make sure you turn right at the end of Buena Vista Street and go to the rope near Grizzly River Run. If you do this on a day when you're planning to see World of Colour, you can pick up your FPs while waiting for rope drop. The parks are generally much quieter when they first open, and it is a good opportunity to do a lot of attractions with short queues.
There are various play areas throughout both parks. Redwood Creek Challenge Trail and Tom Sawyer Island are the big ones, but there are also smaller play areas scattered throughout. Some of the play areas involve fountains and things that your kids can splash around in. There is definitely one in a Bug's Land.
A magic morning pass allows you to enter
Disneyland one hour early on one morning of your stay. Every 3 day pass or longer comes with one. There are mixed opinions about whether it's worth it or not, but make sure that if you're not planning to use it, go on a day when it's not available. Early entry at DCA is not so bad because only guests staying at a Disney owned hotel are eligible for that.
I'm reading up on the redwood trail one that was described by someone else and it sounds like the kids get moving/climbing... is that true or is it a simulation of climbing/sliding/etc. ?
The Redwood Creek Challenge Trail is AWESOME! It's a whole interactive area with heaps of activities to keep the kids entertained and active. There's a huge rope play area, a little zip line and rock climbing wall just for kids, and lots of caves and tunnels to explore. Kids can get a wilderness explorer badge or sticker or something by completing each activity and ticking it off in a little book. As an adult, I find this area enjoyable and relaxing.
I'm seen a bunch of references to a photopass, and when I look it up it seems like a professional photography service. Are cameras not allowed on site? What is the benefit of the service?
As others have said, you can take your own photos wherever you would like all over the Disney area. However, PP is great for getting group photos. I know you said you just want photos of the kids, but don't underestimate how important family photos will be in years to come. I absolutely the treasure the family photos I have from when I was a kid, and would hate to not have any photos with my parents in them. After all, it is a family vacation right?
You don't have to pre-purchase PP. You can just walk up to any PP photographer (you will recognise them when you see them!) and ask them to take your photo. They will take one with your camera too if you like. Keep the little card they give you, then you can look online when you get home. If there are only one or two that you like/want, then you can just buy them individually. Otherwise, you can just use the ones that the photographers took on your own camera.
We'll plan one day around the character meal (the grotto has the princesses, right?) and one around the dress up thing.
I would HIGHLY recommend doing the princess makeovers and the character meal (yes, Ariel's Grotto for princesses) on the same day. It will give them a reason to get dressed up (imagine how excited they will be to have their hair and make-up done to go and meet the princesses), and make the character meal all the more special as well. You can take as many photos as you like at the character meals.
What's wrong with iPads? is it a blocking the view thing? or is it concern about wrecking it with water?
I especially hate people filming the fireworks on their iPads. Some people hold them above their head for the whole show to get a better shot. I find this very rude. I once found myself watching the whole show on someone's iPad because they were holding it up right above my face and it was all I could see. I felt like I may as well have watched the show on
youtube. Ok rant over.
I also don't agree with using iPads for cameras on dark rides, as the large screen emits a lot of light which spoils the effect for everyone. It's similar to the use of flash photography in my eyes.
On more open, fully lit rides, I don't mind so much, but it is still distracting to other riders because it is such a large screen. A camera or smart phone is much less intrusive.