I think it ultimately comes down to your budget, but whatever you decide make sure the friends coming along are well aware of what you are and are not paying for. Kids, and even teenagers, are NOT the best at budgeting amounts of money appropriately. Often they underestimate things vastly, and since everything is so expensive at Disney I am guessing that there would be a strong possibility of that happening. The last thing you want to happen is to decided to not pay for their friends, and while down there everyone but say one friend decides that they want to do some activity, and that one friend can't afford to do it b/c they ran out of money at the beginning of the week. That would put them in a horribly awkward position, your children, the other friend, and especially yourselves. Those are not the situations you want to wind up in on vacation.
Also, one major no no, and I'm not saying that you would do this, but if the friends come do not place any expenses on them unexpectedly. A lot of people feel it is acceptable to do that and I'm a firm believer against this practice. Partly because that happened to me when I was 15. At the time my now husbands family (my husband and I have been friends sine we were kids) took me with them on vacation when they went camping. I helped pay for gas and paid for all of my own food on my own accord. Basically the only thing they gave me was a spot to sleep and that was very nice of them. Halfway through the week however they informed me that I was taking all 7 people with us out to eat! I had only brought $200 of spending money so I spent a week hoping desperately I had enough money to cover dinner for that family. (I'm sorry to say it but the only one who eats not like a hog in that family is my husband.) Basically they were very pushy about it and I have never quite forgiven them for how they treated a 15 year old on vacation! It was too the point where I was eating very small meals for fear of not having enough money of paying for that meal at the end of the week, and I kept having to say that I simply was not that hungry. What a cruel thing to do to a child! So that was something they most definitely should have told me before hand. Not that I minded paying the $180, but I did mind that they waited until we were 12 hours from home to tell me that. What I minded even more was once I got back I found out that my parents had given them $500 to cover my expenses, and they STILL made me pay for their dinner. That $500 covered not only all of their gas for the trip one way but also the entire week of camping! So while that is an extreme case of rudeness, I just wanted to emphasize how a kid's time could be completely ruined if something unexpected, even something as little as an unexpected activity, comes up that they haven't budgeted for.
Now again, it comes down to your budget and the fact that you are even considering taking their friends with you all is incredibly nice. However, I'm of the mind where if you invite someone you pay for everything. If you have the means to do it I would pay for their food and activities. (Of course what activities do you mean? Some would fall under the superfulous category and I wouldn't pay for those.) The only thing you definitely should not be paying for is souvenirs. Activities are up in the air (depending on what it is) but if you can pay for theirs I would do that. I personally would rather just take my kids and spoil them while down there, than take the friends and ask them to pay for their own activities. Either way your children will have a good time and I'm sure they realize that they are asking a LOT to be requesting that their friends come to Disney as well. In the past my parents had permitted me to bring along friends, however, I never asked to bring someone along, they just simply told me to pick someone b/c it was in their budget to bring an extra person.
Your kids will understand no matter what you decide. Just keep in mind that different families will see an invitation differently. You might invite a kid from a family that will automatically assume everything is paid for. THen again, you might get a friend along who is trying to pay for your every meal out of gratitude. It is a toss up so talk to the kids parents in length if you decide to take them along.
