That looks like a nice trip too, much more compact than the first one. I like that you put London last. This will avoid the problem of a very early morning flight from Venice that many travelers face.
I do have a couple of suggestions:
Use the s-bahn to get from the Munich airport to a hotel in the city center. Do not rent the car until you are ready to leave to tour Bavaria. Add a night to that portion and include Dachau there rather than a daytrip from Munich (with only one full day in Munich you don't have time. It would be good to add a night to Munich too, actually).
Taking the car into Switzerland to spend three nights at Gimmelwald! with the car parked and useless! is not a good plan. And taking the car to Bern to drop it would be going backwards. Instead, drop the car in Germany on the Swiss border and continue by train. Two towns along the Bodensee have worked for others in this respect: Lindau or Friedrichshafen. You would then ferry across the lake to a train station. Take a look at the Swiss rail map to see how this works. Google "Swiss synoptic map" to see it.
You would then take the train from Gimmelwald onward to Rome, starting with the fun cablecar ride. This is about a 7-hour trip, going via Milan. If you wanted to add Montreux back in to the plan, it would fit here ( between Gimmelwald and Rome).
Flying from Rome to Trieste: this will cost around $214 per person on Alitalia. I did not find any flights on the budget airlines like Ryanair or EasyJet. The train would cost much much less and at 5.75 hours would not take much longer than the flight, by the time you factor in travel to the Rome airport and security/wait time.
And do you really want to go to Trieste to rent a car for Croatia? Most rental companies prohibit taking a car from Italy into Eastern Europe, which includes Croatia. Read more about this on Auto Europe's website, then call the number given to discuss with them before putting this plan into your trip.
http://www.autoeurope.com/go/travel-tips/eastern-european-travel/
The hydrofoil from Venice to Rovinj may be the better option. Then rent the car in Croatia.
Consider an apartment rather than hotel in Venice, and maybe Rome as well. You will have more space at less cost, plus the ability to cook some meals. Keeping boys that age filled up gets expensive when you travel!