Will they be doing MNSSHP during that time?
DLR has Mickey's Halloween Party (MHP), which is like MNSSHP, but with a few differences. The parties have typically started around mid-to-late September (the first parties for the last few years: 9/23/16, 9/20/17, 9/19/18). They usually announce the dates sometime in late Spring/early Summer. So you might be in luck and the first parties will happen while you're there. Just note that almost all of the MHP sell out in advance and some will sell out weeks to months in advance.
Hotels within walking distance that are your favorite and why?
Are you looking for a hotel or a motel? For a hotel, I did really like the Courtyard Anaheim Theme Park Entrance (but it's on the pricey side). The rooms were nice and the beds comfortable. Otherwise, with a little one and the possibility of having to go back to take naps, I would vote for something as close as possible. We usually stay at the Best Western Park Place Inn. It's a motel and nothing fancy, but it's about as close as you can get. The BW Anaheim Inn is a little further, but it's also fine, as is the Del Sol (although, avoid the ground floor because it's very noisy).
Favorite restaurants, character m&g, and rides for 2 year old?
I would not plan on a character meal early in the trip. Some kids love characters, others seem to be freaked out by them. There isn't much point in spending the money on a character meal if the child spends most of it crying. We wanted to do one character breakfast, so we planned it for the middle of the trip. On the first day, we went to see Mickey and a few other characters to see how well the kids did. One loved the characters, the other was much more hesitant, but no crying. So we went to the breakfast on the third day. The one that liked characters had a great meal, the other one spent most of it trying to avoid looking at any of the characters that came over. I think we had only had the younger one, we would have forgone the meal because it wouldn't have been worth the cost.
When they were little, the kids liked most of the outdoor rides in Fantasyland (the dark rides scared them, but they liked the Carousel, Dumbo, Casey Jr, Storybook Canal Boats), IaSW, Jungle Cruise, Tiki Birds, Winnie the Pooh, Little Mermaid, the Train, the monorail, and the Main Street vehicles.
They have rider swap so we can still go on space mountain etc without having to wait in line again right?
Plan on taking your little one with you to the entrance of the attraction to get the rider swap. It was a bit hit-or-miss when we were using it (several years ago), but it seems like they're making sure to check that you do qualify for rider swap nowadays (especially at the popular attractions, like Space and RSR). When we did rider swap for RSR, the CM at the entrance asked to see the little one before giving us the card (back then, it was a physical ticket, but now it's digital).