Basically, when viewing F! really matters, like when we are with friends who've never seen the show before, we invest in a dining package. If it's just us or we're with friends who've seen the show many times, we wing it with free FPs or stand by viewing because it's no big deal.
Given the ages of your kids, I would invest in the HB package. Like the pp said, the free FP sections are almost all standing (and putting your kids on your shoulders is discouraged at DLR because it means people behind you won't be able to see), so in order for your family to have a good view of the show you would either have to line up at the free FP return area very early in hope of getting in to the small seated area next to the RBT reserved area (this seated area is for the first group of people allowed into the free FP viewing area; everyone else has to stand) or get a dining package for the reserved area viewing. Once F! goes to the weekend only low/non-peak season schedule, the shows get more crowded because there are fewer opportunities for people to see the show. If nothing on the HB dining package menu looks like it will work for your group, you are allowed to order off the regular menu, too. You will still pay the dining package price, though, but it does open up more choices for you. Free FPs for both shows are gone by around noon-ish/very early afternoon each day, so if you decide to go with these, make sure to get your FPs first thing in the morning. If seeing F! is important to you, I would do the dining package. Bring something to sit on, if ground seating will be a problem -- hoodies or jackets can work just fine.