We've done Marathon Key a few years in a row. There's a hotel there called Glunz Beach Ocean Hotel - right on the ocean - basic but very clean and pretty nice hotel suites that can sleep four easily. In Marathon there is the turtle hospital -which kids love, a new aquarium which isn't big but is done right and is very engaging to visit, Bahia Honda is a state park just passed Marathon over 7 mile bridge - one of the best beaches I have ever seen outside of teh Caribbean, SE Asia, etc. Huge flat sandbar area to walk and play in - kids will have a blast. There is camping there but it is often full.
Key West is kind of a bust with our kids - so crowded and hot! Though Ripleys museum is a crowd pleaser. we always snorkel and do a kayaking trip while we are down there too.
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