We just got back from Lancaster and had a great time. We went down last weekend for the Thomas the Train event at Strasburg RR and my 3-yr-old sons loved it and we had a good weekend too.
We also stayed at Willow Valley and got the $99 expedia rate (which is much cheaper than booking thru the hotel). The hotel was very nice - great rural setting, the room was really, really clean and the pools were nice. Fodd was ok - nothing great, nothing bad - but not too expensive so it was ok.
We spent a whole Saturday at Dutch Wonderland and yes it is not in WDW's league but it a great place to visit with the little ones. It is also a lot cheaper - $29.95 pp for anyone over 3. The park was very pleasant and clean. It has nice theming and lots of trees and greenery. The rides are definitely geared towards the younger kids - ~under 7ish although there are a couple of things for older kids (roller coasters, etc...) The sprinkler area was nice - we went very early in the day and it did get packed by mid-afternoon. Even though we were here on a Saturday and there seemed to be a lot of people in the park, the lines were not long and more often than not, we either walked on rides or had to wait for 1 turn of the ride to finish before we got on.
They do need to take lessons from Disney though on how to more efficiently move people through the rides - that drove hubbie and I crazy. They would wait for people to get off, load one boat at a time, and send it off, so we laughed that we needed to relax and chill a bit!
All in all- I would highly receommend Lancaster and DW for a relatively inexpensive and fun trip. We drove from LI and took 3 1/2 hrs to get there and over 5 to get home b/c of traffic but it wasn't too bad.
Feel free to PM me with specific questions.
Enjoy!