I also grew up on Grand Island and spent a lot of time in Niagara Falls. It's been fun to go back with my children and being the tour director when sightseeing. I'd say that our highlights include:
American Side:
Goat Island - explore the Three Sister Islands! Small islands linked by bridges and you get right up next to the rapids. View the Horseshoe Falls, Bridal Veil Falls and American Falls from this side. Do the Cave of The Winds walk at the bottom of the American Falls - heights are not an issue, but the walkway gets slippery when wet so hang on tightly to young children. You can also do the Maid of The Mist boat ride from this side.
Have lunch at the Hard Rock Cafe - kids always love it.
Skip the Aquarium IMO.
Old Fort Niagara - Lewiston/Youngstown area. Beautiful setting for a historic fort. Many kids activities including cannon firing, cooking, etc. My kids LOVED it. I believe the jet boat ride leaves from this area aslo - we haven't done that yet.
Power Vista - free and very interesting/informative. After seeing the water intakes, reservoirs, etc. my entire life, it finally helped me understand how they harness the electricity from the Falls.
Fantasy Island - I used to work here summers during college! If you don't go expecting WDW you'll have fun. It's a small park but we've always enjoyed it. Just down the road is Kelly's Country Store - an old-fashioned general store with jars of candy on the loooong counter. You pick and choose and buy the "penny" candy by the pound. DS12 is in heaven!
Canadian Side:
Have lunch at the Skylon Tower - a revolving restaurant with amazing views. I suggest lunch because dinner is expensive.
Explore the Horseshoe Falls from this side.
Clifton Hill area - Ripley's etc. I let the kids choose one of these places.
Butterfly Conservatory - beautiful setting, very fun.
Other comments: There is a cable car across the whirlpool - I'll probably never do it, but many people like it. From what I remember of Niagara-on-the-Lake, it's a beautiful town, but won't hold much interest for the kids. Check the schedule - they do fireworks over the Falls on certain nights. If I think of anything else, I'll post it. It's an amazing sight, the Falls!
I agree with bethbuchall - I'm glad they've left the American side as a park, not all tourist-trap sights. I do however, wish they'd improve the city of Niagar Falls - what a dump! With this natural attraction there to draw tourists, you'd think they'd get their act together. It breaks my heart every time I'm there.
betbuchall - you grew up on Grand Island? I lived there from 1965-1981 in the Sandy Beach area. We only get back every few years now since most of our family is gone....