Jeff, we took our 10y old boy to San Pedro this past July, he had a great time. I'll try to fill in a few more blanks:
Joe's bike shop has kids bikes for rent. It's about a block north of Cocina Carumba, middle street, basically at the north end of town. If you search this site, Joe's used to be on the south end of town, but now it's at the N end. I think a kid's bike ran $20/week, adult $30/week.
Searious Adventures also had snorkel gear for kids, we just needed fins, & they had em for us.
Shameless plug (from a very satisfied customer): Tanisha tours (Daniel Nunez) would be a good bet if you're going to do the cave tubing / zoo tour. Daniel's son is about 12y old I guess, & he loves doing the caves when his dad runs that tour. My boy practically had his own private guide, the son showed my boy all sorts of neat stuff about the plants & animals, it really made for a great trip.
As for the chicken drop, there are local kids hanging around, selling necklaces and such at the drop. During a lull in the proceedings I found my boy & a local kid playing w/ a small crab... the drop is a little risque, but it's fun, and really people of all ages check it out...
Also around sundown be sure to go south of town to the lagoon where the crocks are fed, makes for some pre-dinner fun.
Assuming your kids have some ability to make their own fun (don't always have to have stimulus such as Gameboy, teevee, etc) they will love it.
Enjoy your holiday