Val gardena/ Dolomites: how is the driving ?

While I can't help you with driving in that specific part of Italy, I can pass on some observations about Italian drivers after motoring around Tuscany for the past 10 days.
First thing is that they like to drive fast ... really fast ... German Autobahn kind of fast. I routinely get passed on the local autostrada by cars whizzing by at least 30 mph over the speed limit, and the more rural roads aren't much better - I always seem to be leading a parade.
Second is that they like to tailgate - I think they must learn it in Italian driver's ed because they all seem to do it, and I'm talking the welded to your tailpipe kind of tailgating.
Those two things taken together can make for a stressful driving environment. Add some twisting mountain roads and you might be very uncomfortable indeed if you're not prepared for it.
The solution is to just pull over whenever possible and let the speeders pass. Really no big deal. The locals seem to appreciate it and it allows me to get them off my back and settle into more leisurely cruising ... for a while anyway.
Thing is, none of this seems to be done with hostile intent ... it's just the way they drive - aggressively but friendly. Might be counterintuitive but it seems to be the Italian way. Bottom line is that we've not regretted driving in Italy for a second. You'll love it.

You definitely should not skip the region, the area is magnificent, with great hikes (are the kids old enough to walk?). After three weeks you'll be used to the car, and the roads, while hilly and twisty are in a generally good condition and not particularly narrow along the main Sella Ronda passes. So yes, you'll have to cope with Italian drivers, but if you're "experienced" you'll be fine - my benchmark being French drivers, I find Northern Italian drivers to be only marginally worse/faster. Portuguese driving standards certainly aren't better.

I had no problem last summer for a week driving in the Dolomites in Italy and the Julian Alps in Slovenia. {Verona, Val Gardena, Badia, San Cassiano, back into Austria across into Slovenia to Lake Bled, across the Triglev National Park to Kobarid, back to Padua. Take your time, don't get rattled. Think driving 2 lane roads through the Adirondacks, or the Eastern Townships. Now, the ease may depend on the ages of the kids, and how long they can sit still.... But there are lots of small places to stop for a half hour/hour to let them snack and relax.

Nothing to do? Lots of mountain meadow hiking from the top of many gondolas/ski lifts that operate in the summer. Climbing around on WW I emplacement lines on steep mountain ridges? Otzi the 5,000 year old "Ice Man" in the Archeological Museum in Bolzano? Great food including wild game. Pizza everywhere. Local Lagrein wine. The Tour d'Italia went through Ortisie two years ago, so check out bicycling. LaPosta Restaurant in Santa Cristina is wonderful. We used Gillian Price's Short Hikes in the Dolomites last summer (available through Amazon of course) for picking do-able hiking targets.

You all will have a great time! Enjoy!

Last September I drove the Grand Road of the Dolomites from Cortina to Bolzano. Twisty, turns, mountainous, GLORIOUS! The roads are in excellent condition and with the driving experience that you’ve had, should not be a problem. There might be trucks slowly chugging up a hill in front of you and all you need is patience. Same for bicyclists.

When I read that someone says driving is difficult and stressful, I question what their road experience is. I’ve driven the Amalfi Coast road twice but I was not crazy enough to do it in season. I did once in November and once in December and thought it was great. Of course before you leave, you might want to do a few laps at Circuit Gilles Villeneuve. Maybe a niceSunday drive on June 9th? I’ll be in l’epingle looking for you!

We drove from Venice to Ortisei and then to Vicenza last October and I didn’t find the driving any more difficult than elsewhere in Europe. The condition of the roads was very good. It can be a challenge to keep your eyes on the road rather than the stunning scenery.