Recommendation

I think Croatia would fit the bill. But I would split your time between Dubrovnik and Montenegro. We rented a flat outside of Kotor. It was right on the bay and there was a small beach. The old city was fun and we enjoyed exploring the towns around the bay and going inland. Our kids (and ours as well) favorite day was on the bay with Katie and Tim https://www.montenegro4sail.com. We explored deserted islands, swam off the boat. Just a splendid day.

Having been in Austria in the spring, I fell in love with the country.
May I suggest, thinking about activities that MIGHT interest your children] :

Salzburg [Fortress, not to mention the beer garden for you,]
Hallstatt [GREAT salt mine tour, boat & funicular rides]
Melk /Krems [biking and boat rides, and the Abby.]
Vienna, [Schonbrunn Palace- with zoo and tram ride around grounds] Spanish Riding School, & the incredible city.

Just my 2 Cents worth- safe travels!

Can't help you with your plans very much except to tell you that your 2 children are too young to visit Auschwitz. Save that trip for when they are teenagers.

Agree to the above. Also is this 7 days including travel days? You will lose two of the seven to travel. Croatia is not the easiest to get to. You have only five days. I would personally pick one location and maybe do a day trip with a 7 year old. Have they been to Europe before? You are going in the height of tourist season. Places will be crowded.

I would get Salzburg in there because there are lots of things for adults and kids:

Saltmines

An ice cave at Werfen (Google image "Eisriesenwelt". They use old-fashioned carbide lamps.)

Eagles Nest/Hitler's Hideout in nearby Berchtesgaden

Konigsee boat ride, also near Berchtesgaden

Sound of Music tour

Poland - 5 days in Krakow, which includes 1 day in Auschwitz and 1 day at the salt mine

Croatia - Dubrovnik and possibly 1 day in the Bay of Kotor

Austria - Vienna and Saltsburg OR Vienna and the Julian Alps in Slovenia

Great locations, but you only have a week?

So
Friday to Krakow, Arrive on Saturday
Sunday - Krakow
Monday - Krakow
Tuesday - There are direct discount flights from Krakow to Vienna for under $100 and about 1 hour of flight time
Wednesday - Vienna
Thursday - Vienna
Friday - There are direct discount flights from Vienna to Dubrovnik for under $100 and about 1.5 hours of flight time.
Saturday - Dubrovnik
Sunday - Dubrovnik
Monday - Return home.

You really need two more days to make that somewhat realistic. If you can leave on Friday and return on Monday, then maybe..... Still, as mentioned, a concentration camp isnt the greatest place for kids.

Much easier would be to skip Krakow and add a day each to Vienna and Dubrovnik. But Dubrovnik is bloody miserable in the summer. Wall to wall tourists.

Think about something a bit easier and less touristy.

Saturday - Fly out, Sunday - Arrive Budapest.

Monday - Budapest
Tuesday - Budapest
Wednesday - there are discount airlines between Budapest and Podgorica non stop, under $100 and take about 1.5 hours, then transfer to Budva. Beaches, walled fortress town, lots to do, fewer tourists.
Thursday - Budva
Friday - Budva with a day trip to a number of great coastal towns or the Bay of Kotor or into the mountains
Saturday Budva
Sunday - return home

If you can stretch it a day or two, add time to Budapest.

All great choices.
I agree about not taking kids to Auschwitz. We visited in 1989 and my wife had nightmares for days after.

For one week only, I wouldn't spend the money on expensive high season air tickets for only a week. Consider not going to Europe until you have two weeks vacation. You can go to Montreal and Quebec City, Canada, were you experience the French culture.

If you insist on going in high season, have you done a test run on what air tickets will cost?

Flying to London might be cheaper than Central Europe?

The lower prices in Eastern/Central Europe might offset airline costs. Although Vienna and Dubrovnik aren't bargains, Budapest is s bit cheaper if you plan a bit and Budva represents great savings.

I am another who feels the children are too young for Auschwitz. You cannot protect them from evil forever, but a bit longer would be good.

if Vienna ends up being the choice, I suggest going to morning practice at the Spanish Riding School instead of a full performance. It is very interesting to see the training and practice, especially if you stay for the last 30 minutes when they bring out the young stallions just starting training. And it is much less expensive (I recall we paid about €10 each). No reserved seating, and you can come late or leave early if you like.

Slovenia is lovely and very friendly, and would combine well with Vienna. But they would like Salzburg too. Tough choice.

An alternate idea could be 3 nights in Krakow (save Auschwitz for another time) and then spend 2 nights at the resort town of Zakopane, about 1:45 hr south of Krakow. In Zakopane there are many fun summer activities like ATV excursions in the mountains or tobogganing down Gubałówka mountain.

Zakopane also makes for a great base to explore the Tatra Mountains, which are part of the Carpathian Mountain range between between Poland and Slovakia. The Tatras are even part of the UNESCO World Biosphere Programme due to their "many rare and endemic animals and plant species, such as the Eurasian brown bear, European Wolf, and Eurasian lynx."

One of the main sites in the Tatras is the unique lake known as the Morskie Oko (Polish: Eye of the Sea). The lake is flanked by several tall forested peaks. It is fifty meters deep and is the only one in the Tatras with a natural stock of fish (one of the reason why it is called Eye of the Sea).