Need suggestion for destination with kids

How about staying in a castle and let them "play knights"? Some German castle hostels have family programs for that.

If you have travelled with both kids before- tell us what they liked and didnt like. You possibly have more experience on travelling with young kids than most of us

I don't think kids that age should be a major factor in your itinerary. I mean, you aren't planning to visit Disneyland Paris just for them, right? I wouldn't go to Rome or Dublin, or Berlin or Paris, for their sake either. A 5-year-old will probably like a playground, a splash pool or a beach, a zoo, or a train ride, no matter where you are. They can enjoy a waffle or a piece of pizza or burgers and fries anywhere. So if you end up in Bruges for your own reasons, take an outing to the beach if they'd like that. If you're in Frankfurt, make a stop at the zoo for an hour. Find a McDonald's in Paris, if that's where you plan to stay, and the next day, spend some time letting them feed the waterfowl along the Seine. Set aside a little time each day and give them a couple of choices for "kid time".

Have you considered a farm stay in Germany, Austria, Northern Italy? Many of those offering farm vacations cater to families with children, via petting animals, pony rides, playgrounds, etc. Several of the sites advertising these types of vacations are in English. Here is a sample web site:
http://www.redrooster.it/en/ For Germany and Austria, you could google "Ferien auf dem Bauernhof". I'd try to find a place near a lake, for boat ride and swimming opportunities.

It's hard to recommend a place without knowing more information about what kinds of things you like to do, or are expecting out of this vacation. Or what time of year you're looking at. I would say any large city (Paris, London, etc.) is going to offer lots of things to do for kids. The French Riviera has the beach and lots of things to do (we had a great family vacation there last summer). And if you came to Paris, you could very well plan a day or two in Disneyland PAris. (But I don't recommend it if you've been to WDW and really liked it as I don't think it lives up to the WDW experience.) One other option to consider - if you have the funds for it - is a cruise. (I'll quickly duck for cover as I know that's not a popular opinion 'round here.) You can see lots of places, but only have to unpack once. There's kids activities on board. We've done the Mediterranean by cruise with our kids and enjoyed it.

Yay! Someone besides me recommending farm stays! Thank you, Anna! Seriously, for kids that age, I'd take them out to the countryside. For us, it's hard to navigate bigger cities with ones that small, getting them on public transport and negotiating crowds. We did a farm stay in Austria when our son was 3, and it was the best vacation we've had so far. No, you don't get to see a lot of the typical sights that us grown-ups get to see, but we had lots of other great memories, like going to a free petting zoo and getting to feed elk. Really, really big elk that I thought would eat my kid, but my husband reassured me that they only wanted the 25 euro cent feed. We're doing Bavaria with our brood this summer. Farms, castles, Legoland, Sommerrodelbahnen, and stinky cheese. Oh, and the world's largest science museum. What could be better? We had also looked into going to the Dordogne region in France. There you can canoe on the river and see caveman paintings. Get a copy of "Take Your Kids to Europe" by Cynthia Harriman and start planning.

My kids are all grown up but this website almost makes me wish they were young again! http://www.ciaobambino.com/. Great ideas!

We have little kids and our favorite destination is always a kinderhotel. www.kinderhotel.com
We've been to quite a few and they are always fabulous. They're all over Austria, Italy, a couple in Germany and Croatia. Great places to stay during the summer for horseback riding, golfing, hiking, etc. and awesome in winter for ski holidays.