First the beach in Dominical is not kid-friendly. This is serious surfing territory with big waves and if I remember right, no facilities at the beach. You have to use nearby restaurants. It is not a particularly scenic town but a small collection of restaurants, shops and a very few lodging options.
If I were you I'd stay at one of the beaches south of town (Costa Paraiso) or even better up in the hills with spectacular views of the coastline. Most lodgings in the hills require a 4WD as they are up very steep gravel roads. If you rent a house with kitchen you could manage breakfast where you're staying, pack picnics for outings, and then just go out to dinner. Nearly everything in the hills is way outside walking distance to Dominical, but even if you stay in town, many of the interesting places to eat aren't right in town and require driving. The alternative is to pick a lodge or hotel with a restaurant like La Cusinga where you can eat meals. These are all way outside of town and require a car for daily outings. Dominical is not the kind of beach town where you spend most of your time hanging out at the main beach unless you are all surfers. There are lots of beautiful beaches in the area and we tend to visit a different one every day trying to find our favorite. Beaches with calmer surf are Dominicalito and farther south around Uvita. Suggest you research more about area to make sure this is the right fit for your family. It is a spectacularly beautiful area, but you might be happier close to Uvita and its national park.