Should be a beautiful, but cold time to be there. Hopefully, the Christkindlmarkt will still be on in in Marienplatz. The dolls made out of dried fruits & crystalized fruits are great kid favorites. They would definitely enjoy the Deutsches Museum - one of the best science & technology museums in the world with lots of stuff for kids (great on a bad weather day!), the Stadtsmuseum has a great puppet collection if they like that, there's also the Spielzeug (antique toy) Museum in the Old Townhall. Viktualienmarkt is fun to walk around & sample different foods. The large department stores are fun too - Hertie has great food halls & I'm spacing on which has the best toys. There is a great toy store on Karlsplatz (Stacchus). The train station is fascinating too.

For excursions, my daughter loved the romantic road trip to Rothenberg - their torture museum might be a bit much for your younger one, but interesting for the older. There used to be an excellent toy & doll museum there, but I believe it has closed due to lack of funding. All kids love Schneeballen - a powdered sugar covered pastry ball. There's also a tall skinny house on the outskirts made out of one small room per floor that's pretty amusing & kids love walking the city walls.

We had fun on a side trip to Salzburg & did the salt mine tour on the way - unforgettable, then up to Eagle's Nest, which the kids found fascinating. If they are into the Sound of Music, Bob's Tours does a great personalized tour of the movie sites & Schloss Hellbrun with it's hilarious waterworks, though it probably visited better in warmer weather. If there are no lines, the kids would love Neuschwanstein Castle.

Tons of stuff to do - have fun, but beware lots of things will be closed during the holidays.