Typically I recomend the candy cane inn for an offsite hotel, but for family of 5, I would probably say the BW park place inn. It gets great reviews and has larger room. Including some small suites. You'll want at least 3 days, but if you can do more I recomend it. For the time of year you'll be there, 5 days would be better. If you plan on seeing other things in the area, a week would be easy to fill.
Christmas to New Years are the busiest days of the year in the park. You'll want to plan to get the park early, in line before opening time. Take a break midday, then head back for the evening hours. You'll want to be sure to know the ins and outs of fast pass before you go. Hydroguy has a great thread on it somewhere. You'll also want to be sure to use your early entry day (all 3 day or more hoppers come with one day).
If your travel dates are at all flexible, I recomend coming in early to mid Dec. and avoiding the holiday crowds.