I would agree with the original poster's decision, don't do it.
For your family, it probably won't be the best choice for this trip.
We did a cruise last spring (Disney 7 night). We're not huge eaters (except my skinny 11 year old son seems to eat constantly on vacation). Food is available 24 hours a day - we got room service at least twice a day (very convenient for late night sandwiches and morning coffee and breakfast). So other meals, we ate very light. Still, after a week of that, you may not be too thrilled with sitting down in restaurants with your kids. Ditto the kids - they will probably have had enough of that.
Also, it being the first trip taking the kids, I think some of the special meals (with the exception of a character meal if they really love the characters) can probably wait for susequent trips to Disney. You will probably be more interested in enjoying the parks, seeing the shows, doing the rides.
You will be rushed to make meal reservations on the dining plan. That will definitely take park time away.
Every trip and every family is different. Some love the plan, we've never tried it yet. We like to make one or two meal reservations, then just do counter service the rest of the time.
In the villa, you will have a full kitchen. Washer and dryer are so handy! I'm sure the first day you'll be doing laundry.
I'd do some grocery shopping, or order grocery delivery. You will probably be ready for some simple food after a cruise. We were!
I'm glad to hear about your trade; we own Marriott Ko Olina (on Oahu), which is super duper great, and may try to trade through II for Disney one year. We've stayed twice at BWV for cash through Disney - love the location. It's not at fancy as Marriott, but the location can't be beat, walk to Epcot! It would be cheaper for us to trade one year for a week, than pay what we will this year, so we'll see.