The Grand Californian is a great choice, especially for your first trip to DL! I would suggest a Downtown Disney view. It is still affordable, and it is really nice! We loved being in our room and being able to go out to the balcony and view the people and shops/etc. below. If you can get floor 3, it is actually better to be closer to Downtown Disney, as opposed to floor 6, because you can actually hear the music below if you open your door, etc... It is quiet with the door closed, though, so there is no noise problem. If you're lucky enough to get the right location, you could have live violin music playing below you and enjoy it from your room-it's really nice!
I think that you're not giving yourself enough time to enjoy the Disneyland Resort. It is smaller than WDW, but there is still a lot to do there, and if you really want to enjoy it, I would do at least 4 days, since you've never been there before. Remember, you also want to enjoy the hotel and Downtown Disney, not just the parks.
You definately won't need a car, since you're staying onsite. You can walk everywhere you want to go.
The rides at Disneyland are not exactly the same as at WDW. Even Dumbo, although, the ride is the same, is set up totally different, with water under it-I was so missing this at MK! All the Fantasyland rides are different, plus there are ones that aren't at MK. Once we realized this when we were at WDW, we were just riding everything and re-discovering the rides! I think you will do the same with Disneyland! California Adventure is also a really nice park. I think you'll want to spend more than a 1/2 day there. There are many things there the kids will like-Monsters Inc, Bug Land, Aladdin, Disney Animation, etc... Also, Disney Animation is totally different from at MGM, so be sure not to miss it!
If you're going to San Diego, I would encourage you to go to either the San Diego Zoo or Wild Animal Park-they are fantastic-the best zoo's around! Your kids would probably really like Legoland-they have a lot of rides and activities for younger kids. Universal might not be as good for the ages of your kids. Sea World is always fun, but it is just a regular marine park-dolphin show, whale show, etc...-nothing extra special.
Goofy's Kitchen is great for the character breakfast. I've also heard the new Lilo & Stitch character meal is good over at the Paradise Hotel, but I haven't done it yet. I don't care for the one at the Grand Californian. There's also one in Disneyland that's ok, and one at CA Adventure that I haven't done. I think you really can't go to wrong with Goofy's-it's at the Disneyland Hotel.
Happy Planning!