We have just returned from this place, Residence Borgo Dei Limoni, at Gargnano (on the Gardone Riveria);

http://www.lagodigardamagazine.com/index.asp?lang=2&menu=65&ids=593

Whilst it is not a hotel, but self catering appartments, it is well situated, absolutely spoltessly kept (never seen cleaner rooms !), good views of the lake and only a couple of minutes walk from the town center.
They are very roomy appartments.
As long as you don't mind German/Italian neighbours, it is a great place to stay.

Facilities for cooking are a bit limited ; only a 4 ring gas hob - no microwave, no oven or toaster, no can opener or corkscrew, and not as many other kitchen implements as we would have liked, but the basics for preparing meals are there (and the latter you can bring yourself).

Bedlinen and towels are provided as an extra (10 euros pp) and these are pristine clean.

We looked at a few hotels ourselves before booking but found it expensive with two children (similar ages to yours) and actually this worked out not only cheaper but a a much more spacious option.

Re : Residence Borgo Dei Limoni
I felt compelled to post that since I returned, I noticed on another holiday based website, that someone had their reservation cancelled by Borgo Dei Limoni with only 4 weeks notice before arrival -even though they'd booked nearly a year in advance, ......they said they were now 'over booked' !

I'm not sure I would want to recommend this place in the light of reading this.

Proceed with caution as they do not require a deposit until after arrival !