As much as we loved LTT, I think that I would recommend the Crystal Palace to your friend - when my children were that young POOH would have been the best!
Then again, being served at the LTT was way more relaxing and just plain easier than dealing with the crowd and the buffet tables at the CP.
Yeah - I'm a lot of help!
ETA - I *much* preferred LTT; the food at the CP was better, but everything else was better at the LTT. But I can see that your friend's children may really love Pooh and friends.
We saw Minnie, Chip, Dale, Pluto, & Goofy at LTT on Christmas Eve. Although we like the Pooh characters, we just liked the food & atmosphere much better at LTT.
We also had Chip, Dale, Minnie, and Goofy. I loved their colonial costumes! I think Meeko is supposed to be there sometimes too. I really liked the atmosphere as well.