My points knowledge is somewhat limited at this property, however I have been to Atlantis 3 times the last year with another trip upcoming.
With kids it is absolutely NOT worth paying the 100K in points to go to the Cove. The cove is adults only and you are paying for that privilege. In regards to kinds in the room, I just checked my most recent confirmation email from Atlantis(Please note this is a casino comp not a points night for the Cove)
"Beach Tower, Coral Towers, Royal Towers and The Reef additional guests 12 years of age and over will result in a $50 per person per night charge with a maximum room capacity of 4 adults and 1 child under the age of 4.
The Cove additional guests 12-17 years of age will result in a $50 per person per night charge with a maximum capacity of 4 people. Additional guests 18 years of age and over will result in a $75 per person per night charge with a maximum room capacity of 3 adults."
Given this, I would imagine that you would be able to have your wife and 2 kids in the Cove. IMO take the Royal Tower(you should be able to get a room with a view) and take the points you save for another vacation. Enjoy the pools, swim with the dolphins, and go to the Fish Fry for some conch salad.