My two cents......I would switch to a one bedroom either in MK or Epcot area or RIV. WHY? The convenience of being able to keep your children in the stroller going from park-to-room cannot be underestimated. Each location has pros/cons and offers many dining options. Keeping your stay at DVC will give you that full fridge and washer/dryer which will be super convenient with such young kiddos.
I believe you are over-thinking the need to keep the littles separate for sleeping. By the time you go on vacation, I assume your 1 year old will be eating more solids and thus more likely to sleep through the night. If not, your 3 yr old will probably be so tired it won't matter. I would definitely start "training" your children to sleep with a sound machine (assuming you don't already). It greatly helps the bedtime routine training your body and brain to relax with that sound and provides noise-cancelling qualities.
If you want to save even more money, I would suggest getting 2 rooms at CBR and ask for connecting. Once your rooms are assigned, DO NOT open the doors to see if they are connecting. Go straight to the front desk and ask if they are connecting. If they are not, request to be reassigned. They will be much more accommodating if you have NOT entered the rooms yet. WHY? Because if a guest opens the room door, the housekeeping staff will have to revisit the room and sign off before it could be reassigned to another guest. Housekeeping is often not available or doesn't have the time to do this late in the day when rooms are being released to guests as they have such a busy schedule.
CBR has great pools and waterplay areas for kids and a huge playground. The skyliner access is a gamechanger and gives you even more dining options beyond CBR and RIV.
