Our DS was 2.5 during his first trip back in December 2005. We also stayed at the WL and he LOVED it. Our room opened up to the lobby and his favorite thing every morning was to go downstairs to look at the "fountain" in the lobby. He just HAD to do that each morning. It was too cold when we went to swim, but the pool looked awesome! We took a surrey bike to Fort Wilderness as well.
The earlier in May you go, the better. Avoid Memorial Day weekend if at all possible.
I would do park hoppers. I've never done WDW without them, though. I like having the option.
DS LOVED the characters! Ever time he saw one, we had to wait in line to meet them! LOL We did two character meals during that trip. A year later we did the playhouse disney breakfast and DS really enjoyed that one.
One thing that we weren't prepared for was that DS would CRY at the end of rides, shows, etc. because he didn't want them to be over or didn't want to get off of the rides. We ended up doing Small World 2x in a row because of this! Luckily, now at 5 years old, he understands that there are tons of other cool things to do/see and if we only go on one ride over and over again, we miss out of those other things.
At 2.5, DS did fine in the shops. But when we went back at 3.5 years old, DS HAD to have everything he saw. We had a lot of meltdowns that trip because of that. We had to start avoiding the shops/carts. At 4 and 5 years old, that was gone. We still refer to the trip at 3.5 years old as the "bad" trip.
At 2.5, DS also took a lot of his naps in the stroller so we could stay in the park and wander around. Or my mom (she came with us that first trip with DS), would sit with the stroller and DH and I would ride some of the thrill rides.
Before our trip, we made an effort to see so local fireworks shows in town to test DS to see how he would do. He ended up sleeping through Holiday Wishes during
MVMCP and also Illuminations!