I'm thinking of taking the family to St. Augustine over MLK weekend, also. I've been several times myself, my husband and I have been once together, our oldest son went on a school trip, but our youngest son has not been before.
Groupon is offering discounted tickets to the Florida Museum and I think Living Social has ones for the Lightner Museum. I haven't been to either of them, so I imagine we'll do at least one of them if we get to go.
Like the others said, the Castillo de San Marcos is a must-do. My husband and I did the Ripley's museum when we were there and it was a fun way to spend a couple of hours. We also went to the wax museum and did a ghost tour. We'll definitely take the boys on a ghost tour if we go, and I'd like to do one of the evening tours of the lights if we go this month.
I'm looking at staying in the historic district. I know it's more expensive, but I'd rather be able to walk everywhere than have to pay to park at the welcome center or somewhere else.