We didn't do MVMCP back in December 2008 but did stay to watch Wishes and the lighting of the castle (into crystals) on a normal night. Though we love MK we don't particularly like it on a night.
There are a number of reasons why this is so. We love Wishes but find staying out late to be a struggle when we have had a busy day out and about already. Also the optimum viewing point is in front of the castle where everyone else tends to view, people push and shove, strollers are pushed into you and basically the majority of people are tired and not in the best of moods. Wishes is fantastic but then as soon as it is over a lot of people head out of the park. One year it took us an hour and a half to get out of the park and back to the hotel (which was 15 minutes from the park), this was in July though. Standing waiting to get onto to the ferry with little children at the time was no fun, to them it must have been terrible as they were pushed into and couldn't see where they were going because of the crowds around them. However, in December when again we braved the crowds it was not so bad (we did go for a drink to delay the exit but were shattered) getting out but that mammoth experience of getting out of the park really put us off doing Wishes everytime we go to Orlando. I would rather do Epcot as it is easier to get out. With MK you have the line to the ferry/monorail, then have to get a trolley train to your car parking lot.
The lighting of the castle was beautiful and that was done early on at about 6 pm which is unmissable. Personally with your kids being young I would opt for the cruise then at least they are not being jostled about and you can keep track of them, if you think they can all stay awake till 9 pm or whatever time it is. Perhaps have a really relaxing day or an afternoon nap to have the energy to stay out later. We tend to pack a lot into the days, as we want to make the most of it, so tend to feel tired on an evening. Definitely do not miss seeing the castle light up in crystals - it reduced me to tears.
Supposedly it was supposed to be Disney's quietest weeks when we went 10th to 21st December but we saw no difference in the crowd levels compared to peak season July when we are normally there.
I do absolutely adore seeing the fireworks behind the castle but just hate the crowds before and after the fireworks and the travelling to the car when tired.
The Osbourne Lights at MGM is fantastic, there is plenty of space and it is easy to get out of the park. The lights are put on here at about 6 pm I think, then have the musical bit on every ten minutes or so, till a set time. There was a lovely atmosphere here.
We also enjoyed Macy's parade - make sure you are near the Christmas tree (as it sends paper snow out when Father Christmas does his countdown). The kids will enjoy seeing all the balloons and the pieces of paper falling from the sky.
Not wishing to wish the time away but looking forward to reading all about your trip Louise.
Surprisingly I have found our next trip is almost upon us too, somehow, it has kind of snuck up on us with us having other things on our minds - but I can now say we are going away on holiday NEXT MONTH - how cool is that?
its getting very exciting around here!!
for Cam
She gave me a telephone number of a wish charity that would help us but to be honest im so not into the whole asking for a wish thing so for now unless my thinking cap starts to spin again - No major surprise !!
Your plans sound great and free tickets - yay! 
However its an idea that has only been shelved - not forgotten I will get to stay in that resort 1 day !!! 
