So many questions!
One thing I want to point out with the home away from homes is taht a 2BR villa could possibly cause a problem in the inequity with the BR's. You would have the masterBR with king bed and jacuzzi tub, plus a walk in closet. Then in the LR is a queen sleeper sofa. In the second BR is a queen bed and a double sleeper sofa, anda MUCH smaller bathroom. Divying that space up fairly would be tough.
You almost always will get a better deal renting points rom a DVC member over booking directly with WDW.
Because your youngest is two (although if he/she is 3 before you go that's another set of problems) you can still put four in a non-deluxe room at AKL. The cribs are only pack-n-plays though, pretty tight for a 2YO. Also, the rooms at the AKL are small. Even the deluxe rooms are really tight for a family of four, let alone five, especially as you'll be spending time there for animal viewing and naps and such.
Perhaps you could work out a compromise. Split your trip--the first half get a 2BR villa through DVC, and one couple gets the master BR, the second half rent a 2BR suite at the AKL and the other couple gets the master BR. Otherwise, I'd just plan on getting seperate rooms.
Keep in mind that with DVC points rentals, you don't get daily hosuekeeping. It doesn't bother me, but some people get really uptight about it. If you do go that route, I would make sure that your freinds are very aware of that.
I don't think anyone can name the "best" resort. It's simply too subjective. As far as best DVC, I think most would agree that BWV is best to be in the middle of it all, and OKW is best if you want something more laid back.
As far as the other resorts, you'll hear everything from All Stars to the GF (neither is close to best in my mind, but that's my opinion.) It just depends on what you want from your vacation. If you want MY opinion on best, it would be as follows:
Best moderate: POFQ
Best Home Away From Home: BWV
Best deluxe: AKL (the Polynesian is a close second, and keep in mind that I've only stayed in concierge rooms in these resorts, which definitely adds to the experience.)
Anne