My wife and I have been to UV in Orlando 7 or 8 times over the past decade. No kids of our own but we're big kids.
Your children I'd think are the perfect age. WDW has caught up significantly in ride quality over the past 5 years, but until then UV was much better for anyone over 12 (IMO).
You can do most of the 2 major parks in 2 days (Universal Studios and Islands of Adventure). We've never been to the water parks and we don't ride the water/get you wet based rides. That said, I still think you could do both in 2 days particularly if you have the Express Pass. Some of the queues are worth standing in for the full experience (Forbidden Journey in the HW Castle for example), others it isn't a big deal to 'miss' what you see in most of the queue.
Do a cost comparison for the Express Pass. It is free if you stay in one of the 'premier' resorts - Portofino, HardRock, or Lowes Royal Pacific. You can by the EP for day as well if you aren't staying in one of those 3 hotels.
It can be cost effective to stay in the pricier premier hotels with a free EP compared to their value hotels plus paying per day for the EP. In the value hotels you still get early entry to the Hogwarts in the Islands of Adventure side if you have a ticket for that park or park-hopper. If doing 3 days you could try non-EP the first 2 so you can see the queues, check off most of the stuff, etc. Then get the EP on the final day to quickly re-ride your favorites and possibly get onto rides that you didn't want to spend too long waiting.
It is an added cost, but park hopper option is required to be able to take the Hogwarts Express train back and forth b/w the two Harry Potter worlds since it is a park hop to do so.
Most of the food in the parks is meh - not horrible but not very good. The restaurants in Cityscape are better for dinner - higher quality. I wouldn't waste time walking out to them for lunch though. Whatever you do, get reservations if you want to eat at any place that takes reservations.
Staff - take out the trash.