Oh, my! You can't know how delighted I am that I opened this thread.
Because the first time that my husband and I took children (
on our own) to WDW was in August of 1989. And the children were our two nephews and first granddaughter, then 9, 7 and 4. Just the five of us. The rest of the grandchildren had not yet made their appearances.
And it was a trip that I will cherish always. The boys are in their thirties now and my granddaughter is ... almost. And, although my husband is no longer with us, the four of us still bore the rest of the family with our memories of it at every opportunity. So ...
I was really happy to hear of your husband's plan to permit the kids to manage their own spending money. We did exactly the same thing - with exactly the same Disney Dollars - every time we took children to Disney. And it works beautifully. The trick, however, is to resist the temptation to add that little bit of 'extra' on the last day for the one who didn't plan as carefully as did the other(s) . As for Characters ...
Both of the children should be fine with them. The only time I've encountered a problem - and I've been in WDW with children (then) aged 2, 4, 5, 6, 7, 8, 9, 10, 11, 12 and into/through their teens - was when that same oldest granddaughter was two. What a disaster
that morning at The Polynesian was! Swimming ...
We stayed, that trip, in a villa within walking distance of what is now Downtown Disney. We flew down (the kids' very first plane ride) and rented a golf cart to scoot around in the complex and back and forth to The Village. They loved the cart. In fact, I think that it was truly their favorite ride - as they all took turns helping their uncle/grandfather drive. I think that the Monorail was a close second.
And there was a lovely quiet pool and hot tub just outside our ground-floor door that, for whatever reason, we seemed to have all to ourselves. So, we planned one Pool-and-Play Day during the ten days and also enjoyed it every early morning for a short dip before heading to the day's Character breakfast and on late afternoons when we returned to rest a bit before heading out to dinner (there were only three parks then and no such thing as a FastPass - glorious!). A couple of times (when the next day's plans began a bit late) we all splashed around wickedly late at night, too. It was a very hot summer.
Our oldest nephew and my husband rode everything. My younger nephew would sometimes keep me and his cousin company when I was 'afraid' to try some of the scarier adventures that, surprisingly, were not among his favorites either ...

I should note, though, that this was the boys' second trip to WDW - the first had been with my husband, their parents and grandparents and me - so we had the advantage of knowing their favorites and the ones that they weren't particularly fond of.
Too, importantly, I think, we 'called home' each evening so that all of them could share the fun with their Moms and Dads. Besides, that was the deal that I had to make in order to get those Moms and Dads to let them go.
We planned dinner at our favorite restaurants and the kids were free to order whatever they liked (if I remember correctly, that year's Dining Plan involved some sort of coupon scheme). They loved being able to choose from the 'grown-up' menu. However, the two youngest slept through Victoria and Albert's (their aunt/grandmother had made a much-too-late reservation) and so we sleepy-heads all ate our beautifully-boxed desserts - with ice-cold milk - when we got 'home'. But, back to your family ...
I think that you've made wonderful plans and received some great advice in the thread. Particularly, the stroller. Get a good, sturdy, dual (tandem-seated) one and do not leave home without it! We did, that trip, but never did again until the last little one in the family reached 8. Because, although my granddaughter and the boys managed to skip and hop their ways through the days, that trek from bus stop to villa each night could sure have used wheels.
The only thing that I would add is Hoop Dee Doo. We scheduled it once that trip and then were lucky enough to be able to book it again when they all wanted so badly to see it once more (each for their third time). So, I hope you've planned an evening in Fort Wilderness. Or, if you haven't, that you will. It is my experience that children (of every age) love it. Finally ...
ETA: Memory Maker, maybe? We took a great big, shoulder-mounted video camera (Does anyone else remember those?) with us that trip and managed to take a lot of tape that we were able to play back for the kids at the villa in the evenings. What hams!
I so hope that you and your husband and the children have a great time and that you'll tell us all about it when you get home. You've certainly made my day.