The 3 weeks between Thanksgiving and Christmas have TRADITIONALLY been the very slowest for WDW. You can usually get great pricing on reservations and little to no crowds. Plus, as an added treat, they have all their great decorations up so it is beautiful.
Of course, there is no guarantee of lighter crowds, but if you plan to zig when everyone else is zagging - you should be able to get into Fantasmic without much of a wait.
Set out your day plan by taking into consideration the Early/Extra hours and the days on which Spectro will be showing. Try to hit Fantasmic on either the night BEFORE or the day AFTER an early entry/late night for MGM. You want to go to Fantasmic when everyone has either just been the night before or is planning to go the next day.
And, if that also happens to be a Spectro Parade night, even better!
As for waiting with small children, there is NO RULE that says everyone in the party has to wait in line. Put one adult in line early, then take the kids on a ride or over to shop or see characters, etc. Then you can trade off as needed. When the line begins to move (and it REALLY IS NOT NECESSARY TO BE AT THE FRONT OF THE LINE!) whoever is in line can go to and hold seat. When you show up with the kids, you can join your party wherever they are seated (you could have been on a 'potty call' for all the CM knows or cares).
The line we saw was 1/2 way down the block an hour before the show. We were given the dinner entry as a gift by our waiter at HBD, but when we went in our entrance, the initial waiting group had been let in and seated and there were TONS of great seats left. In all honesty, it seems to be better to sit closer to the top, just as it is almost always better to sit in the back of 3-CD shows.
Whatever you decide, have a great time - after all IT IS DISNEY!