2 weeks Austria in June - where to stay and what not to miss

Regarding item one I prefer Seefeld in Tirol over Innsbruck, especially with kids.

We stayed in Seefeld at this place: https://www.booking.com/hotel/at/appartementhaus-st-martin.html
(The link is only for the description; we booked by calling the owners and writing e-mails.)

With two small kids I would skip the grossglockner road. I did it last year with an 8 and 5 year old and both were close to throwing up after 2 hours of hairpin bends! They were also pretty underwhelmed at the finale as was I and I had been taken there as a 12 year old so really should have known better! A multi-storey car park and a distant view of a dirty glacier....
Anyway, in general my kids have loved our summer holidays in Austria. One great thing they have done is create amazing play areas at the top of mountains to encourage use of the cable cars during the summer months. The one at Zell am Zimmer is particularly good, especially combined with the alpine coaster. I would consider perhaps three locations, one to the east of Salzburg, any of the lakes. Include a trip to the salt mines at Hallein if your kids are 5 or older. Then a second base in the Zell am zee area. I can personally recommend Rauris and the rental apartment chalet Christophe. There is a great public pool in Rauris with the most picture postcard view. Kids might also enjoy panning for gold up the mountain in Rauris and the gorge at Taxenbach is a great site. You're only about 20 minutes drive from Zell am see as well. I would then move on for a final stop further west, perhaps the zillertal arena where you can visit the mountain top play area mentioned above. Any kid would love staying at the hotel Kroeller in gerlos for their pool complex alone, but they also very well geared up for kids.

In 2011, we stayed in a ski-chalet 50KM south of Salzburg near the town of Altenmarkt. We were planning on going into Salzburg, but never did. We went to a nearby castle, to the Eisreisenwelt (ice caves), to the Lichtensteiner Gorge. It was very pleasant and rural. Plus our children (21, 21, 24) loved the animals (chickens, goats) and yours would probably enjoy them as well. There are small towns with nice small rural restaurants that were very nice, and not hugely expensive.

we have decided to allocate our 14 nights this way-

6 nights in tyrol
2 nights in zell am see (stop when going from tyrol to slazburg region)
6 nights in salzkammergut - st wolfgangsee

does this sound right ?

Sounds good to me, you could easily add another night in ZamS but then I know this area better than St Wolfgangsee. Your kids may well enjoy a trip up ghost mountain in Alpendorf. There's a good playground in the village at the entrance to the cable car

i was also thinking of adding an extra night in zell am see ...2 nights would make it hectic. but then, we will have to cut down 1 night in tyrol or wolfgangsee. we have 6 nights at each in tyrol and wolggang- where should we cut down ?

I'd say take it off the last destination so that you keep the 6 dats at the beginning when you hav jet leg. But you could do this loop in either direction and there's not much between them. As you're renting a car in Munich you'll need to buy the motorway toll sticker - Vignette - at the last gas station in Germany before the border (rental cars hired in Austria automatically have the sticker).