I'm guessing that skipping out on parades and fireworks will not be an option with such young kids. If you're planning on spending more than one day in MK, devote one day to catching the parades, and on the next day take advantage of shorter lines while the parades are going on.
Or, plan your AK day on a day that MK is open later. You can plan it out so that you can go to the hotel and swim, relax, or just freshen up after AK closes then head over to MK (assuming you have hoppers) to catch the parade and fireworks that night instead of on your MK day.
I'd say stay in Tomorrowland/Fanstasyland/Toontown since they all interconnect and you can hit more attractions without squeezing past the crowds lining up. It can be a pain in Frontierland during parades, but if you time it out right, and want to take advantage of SM and BTMRR at that time, you can get some cool views of the parades from the outside areas of SM. Kids love that, haha.