Wow. Interesting that you posted the alternative to WDW as Sedona. I've done 23 trips to Orlando (most repeats of any vacation destination) and six trips to Sedona (second most repeats of any vacation destination). All my Sedona trip have been with my son (Went when he was 2, 4, 7, 8. 10, and 12). If you can stay for seven nights, I highly recommend doing an owner timeshare rental -- you can find these on TUG2.net and Redweek.com. We usually stay at Arryo Roble condos (walking distance to uptown shops and resturants and shops (steep hill though) and lovely property with plenty of ammenities for kids and adjults and exapansive grounds. One negative of the condo pool (indoor / outdoor pool is that it is four feet deep, does have a little ledge, but very close supervison of your little ones would be needed - but then close supervision of children at a pool is always needed. For an intinary, we usually make sure to build in some pool / tennis time to enjoy the resort -- we enjoy going over to the little river on property too and when kids were younger did some playground time, We pick out two or three very family friendly hikes to do during the trip (make sure everyone in your party has hiking boots or shoes and be careful in what hikes you choose -- don't do a dangerous one with little ones) // Do a day trip to one of the nearby Indian Ruins sites (Montezuma's Castle would be the most family friendly), and we usually do one special tour -- Either Pink Jeep or a Helicopter Ride from the Sedona ariport. As you've never been before I think if you do a special tour you would see more with pink jeep. Sedona is an absolutely beautiful place, and we are thinking about doing trip number seven in 2013. A day trip to Grand Canyon National Park is a possibility from Sedona too and we have done this many time (usually if someone has never been before and wants to see this) -- It's a three hour drive each way, but very doable and pretty easy to do. There are also good bus trips from Sedona to Grand Canyon National park (day trips). You will save big dollars though if you do this on your own, especially if you have a lot of people. I've done it on my own twice and did a bus trip once from Sedona (very enjoyable also). The normal recommendation is to get lodging at the National Park for one night to have a longer experience there and to book that early as all rooms will book up, especially during the summer. We've never done that, though, and have always on our Sedona trips made Sedona our home base and done a day trip or two from there.
Here's a link to where we almost always stay. These ar large two bedroom / two 1/2 bath condos. The second bedroom only has two twins, so we usually get a condo rental for each family. I often go with extended family and we on several trips have gotten three different owner rentals next to each other.
http://www.arroyoroble.com/index.html. It's easy to get an owner rental for about $1000 for the week. Retail you would pay closer to $300 a night. With an owner you don't get daily maid service.
Here is a link to Trip Advisor's Sedona information. The travel forum there has many destination experts who can give you good advice too.
http://www.disboards.com/newreply.php?do=newreply&noquote=1&p=44409514
If you are looking for just a hotel room / shorter stay, the Arryo Roble Best Western gets great review on trip advisor and would be in your budget. It has that great uptown location, serves a great breakfast, has a nice pool (I have a feeling it's shallower than the condo pool), and some great views too I think. It would be a great choice for a shorter Sedona stay. This link reviews the hotel and creekside villas (the ones that are rented by the hotel for a higher price and incude daily maid service) / more reviews though are of the hotel rooms.
http://www.tripadvisor.com/Hotel_Re...le_Hotel_Creekside_Villas-Sedona_Arizona.html