Free parking would be street parking and that would be bayside which can be 3 to 4 blocks depending where you park.
The best spot to enjoy the boardwalk where there is rides, games and food is near the inlet area, about 5th st and under.
Just about every place is kid friendly to eat in Ocean City but a few my kids love are
Dough Roller
Fish Tales
Dead Freddies
(the last two have play areas is why)
I would pay to park at the inlet parking area so you can walk to the main part of the boardwalk and it will be easier on your legs.
Have fun