Plakias, and nearby also Damnoni, have great sandy beaches, ideal for small children to play, there is enough sand and space and water...
Maybe the older one of your kids would like to go for a pony ride, and both children can visit the mini-zoo, see www.cretehorseriding.com/en-minizoo.html, near Plakias/Damnoni.
A day tour could be into Amari Village to visit Ghious Kampos, where you will find a big tree which stem is open to sit inside, and you can drink water from a natural spring, then drive on to Gerakari to buy cherries which are ripe in June, after drive on to Patsos Gorge, walk into it, it is very lush and green and there are also springs and visit Taverna Drimos, they have a big childrens playground and a mini-zoo with quite many different animals.
For a day in Rethymnon town I recommend to go to the archaeological museum, where children have created many objects taken the ideas for from ancient finds, and the objects made by the children are now presented in the same display cases as the old ones.
Some ideas for accomodation in and around Plakias: Phoenix Apartments has a childrens pool, Thetis Studios (in the village) and Ifigenia Apartments (between Plakias and Damnoni) have a childrens playground in the garden.
Have a nice holiday