We did our first (so far only) trip to DW last spring, with our kids aged 5 and 3. It was an incredibly fun, relaxing, joy-filled trip for us. The word relaxing is in there b/c we chose to do Disney that way, and the hotel was a big part of it.
We stayed at Port Orleans Riverside. Every day, we'd go to the parks to be there at the start, spend a few hours until the kids got cranky after lunch, then came home to the hotel. We'd spend the rest of the day at one of the pools (either Riverside or more often, French Quarter's) or doing fun stuff around the resort. Surrey bikes, duck-chasing, playground playing. One night we took the boat ride down to Downtown Disney-- if I had known it would be that much fun to walk around (and visit
Lego World) I would have done that twice! (And we didn't even get to Disney Quest, at all).
We didn't do every single ride there was, but we were a happier family b/c we took half of each day off.
I loved Riverside b/c it was so beautiful. My kids want to go back-- my 6 year old son has carefully explained to me several times that when we return, he wants to stay at the same place. (He's making sure I get the message).
To me, the vacation was a family one. That meant I wanted to stay at a hotel where I would be comfortable (a little more room) and refreshed (I thought it was gorgeous and serene).
The kids loved the pool-- it gets hot, so it's not hard to love a pool at Disney-- and they loved having the choice of Riverside or a boat ride away, French Quarter. The FQ pool was better heated, and the slide was better for 5 and 3 year olds, than the bigger Riverside one.
As for transportation....my DH and I were both incredulous at how great the buses were. We never waited for long, only had to stand once (on the bus back from Down Town Disney) and never noticed if it seemed like a long ride to get to one of the parks. I think that's b/c we've never experienced one of the monorail resorts-- if you don't have it in your expectations that it should only take 3 minutes to ride somewhere, then it seems great that someone picks you up and takes you right where you want to go, while you veg. I would hesitate to stay at a deluxe, knowing I'd rather do Riverside again and spend the money I could've spent on a Deluxe.
You can't go wrong, you can't go wrong, you can't go wrong....it's Disney! (But I would vote for a moderate).