The Westgate Lakes is closer to USO/IOA than to WDW.
$60 per night is a good rate for a studio.
Let me try to answer your questions specifically.
1. It is probably a 3 star resort, but I wouldn't stress over the difference between a 3 star and 4 star resort. We haven't stayed at that resort but I have been there just to look.
2. For a family of 4 with kids your age, I would certainly try to upgrade to the 1 br unit if it didn't cost a great differential to the studio.
Forget the negative reviews in general, they will just ruin your stay before you even leave home. One poster gave a whole bunch of negative thoughts about the Vacation Villas, primarily because they tried to get out of their reservation before they arrived and were unable to do so. There were not any substantive complaints, but the resort was going to be bad before that poster left home. So, I would not allow those negative type thoughts to enter in before you start for WDW or USO/IOA.
I would try to see what you could do about upgrading to a 1BR unit. But, if you can't you can't, I would call Hotwire and check the availability and cost of an upgrade. The Hotwire rules say, "Hotel room assignments are determined at check-in and upgrades are not available". If Hotwire doesn't accept upgrades, then I would call the Westgate Lakes directly and tell them the situation and ask if they could upgrade to a 1 BR at check-in.
Just so that you understand how this works, Hotwire contracts with Westgate to supply overstock to customers. I am going to make a wild guess that Hotwire will not help you, but I hope I am wrong. If they won't, then try Westgate reservations directly. Make sure that you talk directly with the Westgate Lakes reservations staff and not the general Westgate reservations office. For example, I made sure that I talked directly with the Westgate Vacation Villas reservations office when I had a question. Don't get discouraged if you have to spend some time now to try to resolve this, if you want to get the 1BR unit now.
The studio would work fine for your family, if you don't want to upgrade.
Please take my advice and come in a month with a positive outlook. The other poster on another thread let the family's WDW vacation be ruined before they even were within 700 miles of Orlando. Don't let this happen to you.