We did that in 2008 - which was also when they went to the current system. Under this system, you MUST buy a length‐of‐stay Theme Park ticket for the number of registered guests. Previously, these were included - note they did make the point values lower when they did this change.
We stayed at Hotel New York. We liked the theme and certainly the location. DL Hotel was of course very impressive, but also a lot of points! The one bad thing I had heard about Newport Bay is that the hallways go on forever (think Beach Club, BoardWalk). HNY was much more compact. The Sequoia Lodge is supposed to be a lot like WL. It (as the moderates that you can't do on points) is a short bus drive away.
Note that your stay will include a breakfast. The buffet at HNY was great!
If you want to do Buffalo Bill's Wild West show (which we liked a lot - if you've been to Medeval times you've seen the same format, but the historical bend and herd of buffalo make it pretty special IMHO), you must book that through MS too. Be prepared for them to be a little challenged by the whole process. DLP is probably the thing they book least! In our case, they made an error in our favor by charging us too little for Buffalo Bill. We pointed it out, but they confirmed the error and did not charge us more!
it was a great time! If you've never been, hte parks are like walking into a dream version of "our" parks - everything is a little bit "off" from what we have grown to expect. I hope the new Fantasyland at MK looks half as good as theirs! You'll probably get to know it well, as you'll get into the park early as a hotel guest and pretty much only FL is open - but its much more spaxcious so not crowded at all.
We had a great time and would gladly go back! We loved eating at Toad Hall (even if we couldn't ride there!), Pirates, and even Disney Village (which was hopping with Dutch World Cup fans when we were there!). We even wandered into the steakhouse there to be surprised that it had a Chicago theme! We weren't expecting a oil painting of Richard J. Daley to be one of the first sights we'd see!
We were staying in Paris before that and took the RER there - very nice but gets crowded during rush hours! When we left we took the train to London - that was very cool!
My only advice is be patient with MS and check everything because the person you are talking too most likely hasn't booked DLP before!