My kids have been coming to San Pedro since the younger was 4 or 5 (they are now 18 and 13). They both love the island. It's their favorite place in Belize, and since I'm a travel writer covering Belize they have seen nearly all of it.
They especially like walking around San Pedro town and doing things on their own. My only concern about that is that car and truck traffic has gotten so much worse in recent years that I worry about them getting hit on the narrow streets. There's also the matter of them being offered drugs and alcohol, but I trust them on that.
* Stay a place with a pool. Cable TV can help, too, and many hotels have it.
* Consider one of the condotels which offer more space than a hotel. We especially like Villas at Banyan Bay which attracts lots of families, but Banana Beach, The Palms, Paradise Villas and others are also great.
* On a first trip at least, my suggestion is not to stay on North Ambergris, but many people would disagree, and there are some great family-oriented places north such as Belizean Shores.
* Most of what there is to do on the island is of the "make your own entertainment" variety -- beach and swimming, walking around, meeting people, exploring.
* There are great day trips to the mainland, most of which kids enjoy though some are tiring for smaller children. I alwasy recommend that if time permits visitors split their time, part on the mainland (usually Cayo for a first trip) and the cayes, to get the most from what Belize offers.
Belize books and publications by Lan Sluder:
SAN PEDRO COOL (the first and only visitor guide to Ambergris Caye)
Belize First Magazine (http://www.belizefirst.com
Fodor's Belize & Guatemala Guide (new 4th edition coming this summer)
Adapter Kit: Belize (the first and only comprehensive guide to living, retiring, working and investing in Belize -- a best-seller on Amazon.com)
Belize First Guide to Mainland Belize
UpClose Central America
Belize Book of Lists