Hi Nitu, two days in Paris is not a lot of time so you'll need to prioritize what you want to see and do. Get a guidebook and let the family have some input.
There's no best location to stay in Paris. Pick a hotel within your budget, near a metro station. Most people recommend the single digit neighborhoods (I like the 4th and 7th). Check the Rick Steves Paris book for recommendations and reviews.
For day one, I'd suggest the Eiffel Tower (purchase tickets 90 days in advance on their official website). Then take a one hour boat ride on the Seine River (you can buy same-day tickets at the base of the Tower). Walk over to the Champs Elysees and take the 300 steps up to the top of the Arc du Triomphe. If you still have time and energy, you're not far from Napoleon's Tomb, the military museum, and the Rodin Museum and garden.
Day two, depending on your interests, you could visit the Louvre or D'Orsay Museums. Or Notre Dame Cathedral (you can take the 400 steps to the top for great view of the city and the gargoyles) and stroll around the two islands.
You may want to re-think the amount of luggage you're taking and pack much lighter. It will be a real pain dragging that stuff all over Europe! I've found a taxi from the hotel to the train station works best for me.
Hope you have a great trip!