I looked into this quite a bit about a year ago. My kids were 4 and 6 at the time. In your case I think the cheapest option is to upgrade your trailer to a sturdier model. You could also add front panniers to the tow bike. At 7 my daughter still weaves from side to side too much to ride in the bike lane. Plus, she's not strong enough to manage all the hills here. It'll be at least another year before we can do regular errands with her on her own bike. I think you're still a couple years off from having your oldest ride his own bike.
In my case, I'm a 5'4" female. Although I'm a strong biker for my size, my kids are now 66% of my weight. I can't haul them, let alone with cargo, unless they can help me pedal. Plus, it's hilly here.
We ended up with a tandem trail-a-bike which I would never recommend. There's too much lateral play in the hitch so the whole thing throws you all from side to side as you ride. Add the fact that the trailer + kids weighed more than me and the tow bike and it was scary and exhausting.
If I were more handy, and a little more badass, I'd get a tandem bike and get the gizmo that moves the stoker's cranks up to kid height. Put the larger child there. Then put the smaller child on a trail-a-bike. Add panniers. Make everyone wear a backpack.
Or, do what another local family has done and get a 4 person tandem. I see the dad and two kids riding it to school all the time.