1) Favorite hotel on site? Maybe at a few different price points. Probably one that is convenient to Magic Kingdom and Animal Kingdom as I imagine spending the most time at those.
There isn't a hotel that is convenient to both of those (the parks are pretty far apart.) With your age kids, I would focus on Magic Kingdom. If you can swing the contrmporary (walking distance from MK) then go for that. If one of the other monorail resorts (Poly and grand floridian look better to you, do that.) If you can't do a monorail resort choose based on what appeals to you/price. They all have buses that go to the parks.
I love Beach Club (awesome pool), Contemporary for it's proximity. We've also done Port Orleans - a cute moderate resort and you can take the boat to Downtown Disney. I've also done the value resorts, and while fine, they are really if you are on a strict budget.
Last time we went, we stayed off site (windsor hills) and got a great 3b 2ba condo for a fraction of a hotel room on disney property. It took less time to drive to the parks than it does to take the buses. You do have to rent a car/pay for parking, but we loved the room it gave us and the $$ we saved. I
2) Do you recommend the meal plan?
Not for kids that age. I can't figure that the counter service is worth it and I found planning seated meals (aside from 1-2 special ones) difficult for young kids.
3) Is 4 days too much with a 4 and 1 year old? Should we do 3 day instead? Is there a 3 day?
You can do anything from 1-annual pass. the more days you stay, the cheaper it is. I think for that age 3 days is good and you can do other Disney stuff (Downtown Disney, character meal, ride the monorail, see the electric water parade from the beach at the Poly...)
4) What are the must-dos? Favorite character breakfast? No one in our group has been to Disney in over 20
years!
Character meals - Chef Mickey in the Contemporary. I recommend doing it the day you arrive to get a quick jump start into your vacation. Plus, it is an easy way for your kids to see characters without the long lines for characters that happen in the park. Plus, you don't have to use a day of park admission. We do dinner the night we arrive.
If you're kids are early risers, you could also do the first seating at Crystal Palace (Pooh characters) or Tusker House (Animal Kingdom.) You can get in before the park opens (unobstructed view of Main Street) and have breakfast.
Your kids will spend 99% of their time in fantasy land (the new and old section.)
learn to use fast passes to your advantage.
since your kids aren't in school, go between Thanksgiving-beginning of Dec or Jan/Feb for the lightest crowds. don't go in the summer if you don't have to. Never go for christmas/new year/4th of july. UGH.
Go to wdwinfo.com - there is more about disney than you will ever care to know!
- a disney nut