Your choice to have a passport or not, but I encourage you to read the "Heartbroken" thread on the DCL board. Someone recently had their flight to the port cancelled due to the storms last week. They couldn't get another flight to FL in time for the cruise (Spring break crowds and many cancelled flights). Only two members of their party had passports so they couldn't fly to Nassau to meet the ship. The whole family missed the boat and had no travel ins. so their paid for cruise sailed without them. Passports would have at least allowed them to meet the boat and travel ins. would have paid for the flight. A very sad story! 
As far as excursion options, there are many! We just sailed on the DCL Magic on 3/19/11 with three kids similar to your kids ages. They LOVED it! All 3 said they liked it more than WDW. I was surprised. We went swimming with dolphins in Grand Cayman and went on a catamaran/snorkeling/some beach time trip in Cozumel. The children had never been snorkeling before and all 3 said it was their favorite part. DH and kids were signed up to parasail on Castaway Cay ($79 each!), but the waves were really high that day and all excursions (parasailing, fishing, etc.) were cancelled. They were disappointed (DH not so much after I told him how much $$ we didn't spend--I hesitate to say "saved"), but now they have something to look forward to on our next cruise! We rented floats on Castaway Cay instead--I think they were $10 each for the whole day.
Long story short, you can spend lots of money in addition to the cruise fare or you can spend not much money at all. It is your choice. I would plan some $$ for pictures, however. Every place we went, people were selling us pictures. They took them on the ship, on the dolphin excursion, on the catamaran, under water, on Castaway Cay, etc. We bought only a few on DCL, but had some really neat underwater ones so caved on excursions. I knew to expect the DCL pics, but not the others.
Good luck deciding! Have a fun trip!
As far as excursion options, there are many! We just sailed on the DCL Magic on 3/19/11 with three kids similar to your kids ages. They LOVED it! All 3 said they liked it more than WDW. I was surprised. We went swimming with dolphins in Grand Cayman and went on a catamaran/snorkeling/some beach time trip in Cozumel. The children had never been snorkeling before and all 3 said it was their favorite part. DH and kids were signed up to parasail on Castaway Cay ($79 each!), but the waves were really high that day and all excursions (parasailing, fishing, etc.) were cancelled. They were disappointed (DH not so much after I told him how much $$ we didn't spend--I hesitate to say "saved"), but now they have something to look forward to on our next cruise! We rented floats on Castaway Cay instead--I think they were $10 each for the whole day.
Long story short, you can spend lots of money in addition to the cruise fare or you can spend not much money at all. It is your choice. I would plan some $$ for pictures, however. Every place we went, people were selling us pictures. They took them on the ship, on the dolphin excursion, on the catamaran, under water, on Castaway Cay, etc. We bought only a few on DCL, but had some really neat underwater ones so caved on excursions. I knew to expect the DCL pics, but not the others.
Good luck deciding! Have a fun trip!
Where is it going? To compare prices...
