We were just at WDW from 12/29 to 1/3 with our sons who are 3 1/2 and 21 months. We stayed off site at a campground in Kissimmee in my parent's RV. We had a couple of days that we went back for naps and a couple of days that we didn't. For us, our 21 month old napped in his stroller most days and our 3 1/2 year old was GO GO GO and insisting he didn't need "quiet time" (the word N-A-P is a bad word in his world so we've taken to calling it quiet time; you don't have to go to sleep but you do have to be in your room and quiet for at least an hour. He sleeps every day but it is NOT a nap!

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Going back for a nap isn't TOO bad as long as you are at the parks when they open. The main day we did this was our last day. We parked the car at the MK at 7:56 am. We did everything we wanted to do in Fantasy land plus a few in Tomorrow Land before lunch. We had PSs at Whispering Canyon at the WL for noon. After lunch we took the boat back to the MK and went back for quiet time at the RV. They napped for almost 4 hours! (this was our last day, we'd been touring all week) After their nap we went back to the MK for dinner, Wishes and Spectromagic. We ended up staying till the park closed at midnight and they were happy as could be and not fussy in the least.
What we did most days was take a break from the parks mid day but not necissarily go back to the RV. We rode the monorail through the resort loop a few times one day (the little one slept, our 3 year old is a train fanatic and was too excited to be on the monorail to nap!), sat in the loby of a resort while they napped another. The baby care centers are great, cool places to unwind a little. On days when we were headed out of the park by 7:00, this worked fine. I know one of my friends was at Disney not long ago and stayed at the HIFS. They tried leaving mid day for naps and her kids would fall asleep as soon as they got to the car. By the time they got to HIFS, they had taken a 20-30 minute power nap and didn't want to nap in the room! They found it easier to stay put in the parks.
The days we park hopped, we left the car where it was and took Disney transportation. Mostly that was because since we were there early, we had parking spots close enough to walk to and not deal with 2 toddlers and a stroller on the tram! That worked out fine for us too. We would have a snack while waiting for the bus and the kids had some down time on the trip over. I admit that it was tough to be out late and have to take the bus back and then get in the car so I'd go by how late you plan to be out.
As for PSs. We had PSs for breakfast with Pooh, one for lunch at Whispering Canyon and one for dinner at the Cape May clam bake buffet. I would highly recommend all of those! The boys LOVED Whispering Canyon! They got crayons and coloring book pages when we sat down. Brandon, the 3 year old, participated in their "critter calls" show where they had guests make animal sounds. He also got DH to participate. They both got magical moments certificates for it. Brandon also did the hobby horse race around the restaurant. They both loved the silly atmosphere and that no one was shushing them trough the meal! With 2 boys, I'd highly recommend a stop there! They have very similar menus for lunch and dinner but lunch is much cheaper! We all loved the Cape May buffet. My sons LOVE shrimp so we knew they would eat here. My 21 month old ate so much that we were certain Disney was going to rethink their "kids under 3 eat free at all buffets" policy!!! The nice thing about buffets is that you get the food right away, no waiting with the kids.
I think the big thing is just to be flexible with little ones. Let them guide you. You'll figure out quickly if you want to go back to the hotel for a nap or not. If yours are like mine, the little one will nap in the stroller as needed and the older one will be so thrilled to be at Disney World that he will go constantly and not realize how tired he is till bedtime anyway!
As far as park crowds on a holiday week...I highly recomend looking into doing Tour Guide Mike (
www.tourguidemike.com). We followed his advice every day but out first and we did avoid crowds and had very very reasonable wait times even on the busiest week of the year.
