Although Huntington Beach and Newport Beach are closer to where you're staying, I want you to google
"Crescent Bay in Laguna Beach." It's a small bay, so the waves usually aren't very big, and even if it's too cold to go in the water you can put your water shoes on and go for a little walk along the rocks on the South border of the bay, which takes you around to a smaller bay where the kids can look at starfish and mussels, and there are some really awesome photos to be taken. Go around low tide. I've taken 3 of my neices and nephews, ages 3.5-10, and they LOVE it.
Don't go to any Wal*Mart stores in the Anaheim area. Trashy people, nasty attitudes, messy overcrowded stores, screeching kids. Holy crap, the kids in those stores.
For food, you have to go to
Jaegerhaus, about a 5-minute drive from your hotel. It doesn't look like much on the outside, but it's a cute little family run German place where a white haired granny greets you at the door and will take your picture if they find out you're from out of town. Not a very impressive beer selection, but they serve some exotic meat like elk, rabbit, and waterbuffalo. "What do you want for dinner, honey? Bambi, Thumper, or Pumba?"
You'll have to eat some Mexican food while you're around, too. My favorite place is about 7-10 minutes from your hotel, but there are only about a million places to choose from. Check out
Taco Adobe near the Orange Circle, or if you want fancy try
Gabbi's in the Circle. Honorable mentions are
Anapelco's and
Taqueria de Anda (locations all over). Orange Circle itself has a bunch of shops and antiques stores (maybe not so good for little kids), and you can walk around the neighborhoods directly to the East of the Old Town shopping area and check out some really pretty homes in the historic district.
Pop any of these names into
yelp.com for directions, reviews, and pictures. None of these places will require freeway driving, although if the freeway doesn't bother you it may save a few minutes of driving.
Perhaps not very Mustachian recommendations, but it is the OC!