If you're going at a busy time of the year, I would definitely do the Fantasmic Dinner Deal. You can make reservations at any Guest Relations desk on-site at Disney up to 7 days in advance. The deal is if you eat at one of the more expensive MGM restaurants (Hollywood & Vine, Mama Rosa's, or Brown Derby if I remember the names right), they'll give you a ticket which entitles you to reserved seating at Fantasmic. They tell you where to go with your ticket and to be there 30 min. before show time. They have a couple sections on the right side blocked off for people with the dinner deal tickets.
We were there in June with 3 kids (8, 4, 21 months), 3 grandparents, my sister and my dh. We ate at Hollywood & Vine around 5 p.m. mostly because it's a buffet and I thought the kids might not sit through a nicer dinner. To be honest, I was less than thrilled when we got into Hollywood & Vine....it was mostly just a big room and the buffet didn't appear to be too nicely displayed. However, the food was actually pretty good. Still though, I think I might try Mama Rosa's next time.
We didn't have to wait in any lines.....we went to where we were told to be at the set time and just followed the group (down a long path). (Definitely bring a stroller....it's a long walk both in and out....you can leave your stroller just outside the stadium.) When we got into the Fantasmic stadium (9 p.m. show), all of the sections except for the ones where they were seating those with the dinner deal appeared to be packed wall to wall. I was thrilled that we had the dinner deal then. The kids were entertained by the crowd doing the wave, by the light toys, and by some toys and snacks I had brought along. The wait didn't seem too bad at all.
Note, I was originally worried about whether we'd be able to get Fantasmic Dinner Deal reservations because we wanted to go the day after we arrived (so I was only booking one day in advance.) It didn't seem to be a problem at all though although we did eat early and we also booked the least popular of the restaurants.
Have a great time!