When my children were this age (now 6 & 8), they enjoyed anything we did together. Mini golf, swimming, playing on the beach, walking the boardwalk, staying up late to see the lights at the inlet and then grabbing ice cream.
Really, it's the little things that they enjoy the most. We've done the expensive all day water parks, but they had more fun at the condo pool. We've taken them out to dinner at a sit-down restaurant, but they enjoyed their dinner from Fishtales (which is more casual).
In August it will be hot and peak season. Try someplace that lets you cool down. Try Big Peckers for lunch/dinner and sit outside in the booths that provide the aqua sprayers.
Someone mentioned getting the books and magazines from your hotel lobby. These are excellent tools for finding savings - but check out the calendar here for what's happening. There are many free things to do during the summer.
Have a great time!
Answered: May 18, 2009