If you're looking for a MAD HOUSE, NYE is the right time to be at WDW! My DW, 5-yr-old DD, 2-yr-old. DS, and I were there last NYE. We spent the day at Animal Kingdom and switched over to Disney-MGM for the evening. By 6PM, the temperature dropped to around 45-50 degrees and MGM was packed! It took us over 1 hour to finally track down a line where CMs were handing out complimentary NYE 2001-2002 top hats and noise makers (but well worth it, though)! Despite both kids running slight fevers the day before, they were both completely against going back to our room to call it a day.
The OFSofL was outstanding! I can't imagine this attraction being better without the immense number of people all around you ooh-ing and aahh-ing. My kids were in awe the entire time. The especially liked the "snow" falling from the sky and the glasses handed out to let you see "angels" coming from all the lights!
There was a stage just outside of the entrace to OFSofL and another stage set up in front of the Sorceror's hat. By 7:30PM, the bands were already in full force and tons of folks dancing in the streets!
Of course, there was the obligatory 60-90 minute wait for Fantasmic! The crowd was phenominal -- the energy was infectious! It was the first time I'd ever seen "the wave" in the Fantasmic amphitheater! After not eating all day, my "sick" DS managed to scarf down an entire 1-ft. hot dog after being inspired by everyone eating all around us pre-show. After Fantasmic!, Sunset Blvd. was packed shoulder-to-shoulder. It literally took us 45 minutes, with no diversions, to make it to the park entrance after the show!
If you choose to make it to 12AM, I wish you the best of luck! We will be back this year (12/30 to 1/5) and staying at the new BCV!!! Personally, if we wind up getting the Epcot-view room we requested in our ressies, there's NO WAY I'll be at the parks on NYE (but I'll sure love the fireworks from our balcony!!). I have NO regrets whatsoever having been there for the experience but been there, done that...