We did a very similar trip -- her parents, us, and our 2 year old -- Berner Oberland, Salzburg, Munich and area, Rothenburg.
For five, and for ease in driving/parking, you could get by with a station wagon instead of a van. (Hard to find a place to park a van in Munich... and you can park the van in Rothenburg easily enough, but you can't get it down some of the streets to drop bags, so you'll be carrying them... been there... done that.) Also, are your parents able to drive a stick? Very few rental cars in Germany have automatic transmissions.
It would be workable to rent the car in Frankfurt, then make Munich your last German city; drop the car at the Munich train station and go by rail from there. Train to Munich to Salzburg is 1 1/2 to 2 hours. Salzburg to Venice is 7 hours on a day train, or there is a night train you can take -- goes from Salzburg to another town (can't remember) an hour away where you catch a night ride that is 9 hours, arriving at 7am (night trains can be fun). Venice to Florence is about 2 hours by train.
Doing only 3 train rides, one being within Italy, point-to-point tickets are very likely cheaper than a pass.
Oh... and to the multigenerational potential stress... slow deep breaths... white wine in Rothenburg, beer in Munich, red wine in Florence...