Anyone in the room can use the credits because they are pooled. They are not assigned to a specific person. All of your KTTW cards will say 3A (you, your husband, 10 year old) and 1C (7 year old).
If your 10 year old wants to order from the child's menu you can pay for her meal OOP or use her Adult TS credit. What you can't do is use 2 children's credits at one meal because your KTTW shows only 1 child on the plan.
If the 7 year old wants an adult's entree, while the 10 year old wants something from the kid's menu that would work because it would still be just 3A and 1C.
Using an adult credit for a child's entree isn't financially practical unless the restaurant increases the entree to an adult sized portion or the child wants a child's entree, but a dessert from the adult's menu.
At buffets, all you care to eat meals and dinner shows the 10 year old is considered an adult.
If you are paying OOP for some of your 10 year old's meals, you can use the extra adult credits for dinner shows or signature restaurants that require 2 credits per person or additional TS meals.
On a side note: it sounds like you'll be going to DW in 13 days. Have you made reservations at the TS restaurants? I would make certain you have reservations before adding the dining plan.