Nikko KIX is definitely the easiest option for you, with such layover timeframe and little kids in tow. However, one thing you have to keep in mind is that the bed config can be tricky with 2 adults and 2 little kids. There's no such thing as 1-king or 2-queen that you see in US, and rarely you will see the equivalent of 2-double bed rooms. In Jpn, rooms are double, twin or single (sometimes there's triple). Double room in Jpn is a room with a single bed that's 160-180cm in width. Twin room is a room with two beds that are usually 110cm or 120cm wide, sometimes 100cm and rarely up to 140cm. We have two little ones in similar age group as yours. We've managed with a single 180cm bed or two 120cm beds, but it's pretty tight even though my wife and I are both slim.

Solution? Hollywood twin - ie, sticking two beds together in a twin room. Two 110cm beds become a single 220cm bed and, all of a sudden, you've got a king++ size bed that's spacious for a family of four to share. There're some rooms that are already configured as Hollywood twin to begin with. There're other twin rooms where you could request the hotel to turn it into Hollywood twin. Not all hotels can do Hollywood twin. Looking at Nikko KIX website, it seems like the Superior and Premium Corner Twin rooms are the only rooms with Hollywood twin config (based on photos only, so I would confirm with the hotel). In addition, the website specifically states that they can't stick beds together in rooms where they're not together to begin with.

If those rooms are sold out at Nikko, then you may have to suck it up and stay in their double (180cm wide) or regular twin (2x 120cm wide) room. Or research nearby hotels to see if they do Hollywood twin. Or get two single rooms.