You guys are a wealth of information - thank you! A couple more questions if you'll indulge me.

I'm glad to know that costumes will not be outside the norm and that staying offsite is unlikely to "ruin the magic" for us. I think I'm leaning toward 5 days and doing Minnie's character breakfast along with one show dining package. I've heard that DL's Fantasmic is superior to WDW's. I'm planning to check out the super-thread, but are they really that different? DS LOVES Fantasmic at WDW, so if this is even better, I would like to make sure to have a great view. Also, are there places where you can find out schedules for character meets inside the parks, along with who is available to meet and where? Specifically, does Mary Poppins do a meet?
With 5 days at DLR I would spend 5 days hopping between Disneyland and California Adventure. If the kids want to dress up, let them dress up. Staying across the street (which motel?) is fine; you'll likely be closer to the entrance of the parks than you would be staying onsite.
At this point, we're thinking either Tropicana or Best Western Park Place Inn. Opinions on which would be best, especially considering that we will likely take breaks at the hotel in the middle of the day?
I would try to make sure to see fireworks and shows (e.g. WOC and F!) early in your visit. That way, in case something goes wrong (e.g. kids get sick, show gets cancelled, etc.), you can try again later in your trip. And, if your kids love the show, you can see it again. Personally, I would stick with 5 days over 4. That way you'll have plenty of time to see everything without rushing, re-visit the things you like best, enjoy all the atmosphere and the little details that make DLR so special, and enjoy pool time, too.
Love this advice! I had been thinking about saving Fantasmic for our last day, but I may just move it up in the plans just in case.
I haven't been for 5 days since '98 and I remember being exhausted on that fifth day ;D
That being said, if staying for more than three I'd definitely take another tour. I really enjoyed the one I took in '07 and wished I'd done it sooner in the trip. I'd pick one more tailored to kids - some of them even come with a free pin.
We did 5 commando park days in a row on our last WDW trip. It was exhausting, but so much fun! I really like the idea of taking a tour. My mother in law will likely be joining us for at least part of the trip (which is part of the reason I am needing to work out some of the planning so early), and so could likely watch the kids for a bit so DH and I could do a tour. Which one would you recommend?
Most people seem to really like Minnie and Friends character breakfast at the Plaza Inn. It has the most characters, some you don't see much of, and it's the only character meal inside DL park. If they really like characters, it might be worth it for you. I would also consider doing the F! dining package at the Blue Bayou. It is a unique to DL experience. It is pricey but the atmosphere can't be beat and with the F! package you get a FP for the best reserved section for a show that many believe is much better at DL.
If your kids love Soarin' and Test Track they are in for a treat. Soarin' is not nearly as popular here as it is in Epcot, so you should be able to get a few rides in. Also, RSR is a much better ride than Test Track even though it is much slower.
It is crazy to me to think of not having to plan an entire day's touring schedule around getting to ride Soarin'.

I get that that is a function of the lack of rides in EPCOT vs. DCA, but it still feels very odd to think of being able to ride Soarin' potentially multiple times without hassle.
I would definitely use your MM at Disneyland on the earliest possible day. Use the mornings to your advantage. The parks are so close that hopping is easy to do, not like at WDW. I would spend most of 2 days at each park, but hop as desired. The fifth day would be spent catching up on missed rides or shows and re-riding favorites.
I would go with a character breakfast since you said your kids are big character fans. Personally I'd go to Minnie's as it has the most characters of any meal and the characters are more random. The other meals pretty much have 5 set characters. I would choose Fantasmic dining over WOC, but I don't think either is necessary as you can see the shows without.
I prefer 5 days! If you have 4 it's doable, but I like the flexibility to redo what I want and see all the shows I want to. Plus it's summer so the parks will be crowded.
The motels across the street are nice and close to the parks. We stayed onsite when we went to WDW too, but it's not necessary and the DL hotels are all considered top tier hotels and charge a premium. Costumes are great. You will see kids in them all over the park. Just bring a change of clothes incase they get too hot. There are a lot of character M&G at DL just like there are at WDW. The nice thing is you don't have to wait as long and many characters meet outside around Main Street, etc. It's not just go to this building and wait to see X characters. Radiator Springs is similar to Test Track, but superior in many ways. All of Carsland is awesome. And of course we have Soarin' Over California. There is a large coaster at DCA called Screamin' that's a pretty big thrill, keep in mind the height requirement on that is 48" and Indiana Jones is 46". Everything else is 42" or less, so both of your kids should measure up.
Thank you! Yes, DD is about 52 inches right now and DS is around 43.5. I fear he won't make Indy. Do you know if rider swap works the same way at DL as it does at WDW?