Glad you have decided to return to our area! It really is a great vacation spot for families!!
I haven't been to Midway's waterpark in ages, but from what I recall...it had 3 main waterslides. They added a lazy river and a kiddie activity area a few years back. Jungle Jim's has a kiddie pool & a wave pool in addition to waterslides,lazy river and an activity pool. I've never been to Jungle Jims' though. IF you go to their websites, you might get a better feel of what the park has. Midway's has a neat 360 view that you can take a peek at. Not sure about Jungle Jim's, but Midway offers lifevests for the little ones.
Since you have been to the area, I'm sure you are familiar with Funland. That is a definate must do with little ones. A couple places that might interest you are Dawn's Country Market on highway One in Milton & Holly Lake Campsites. Dawn's Country Market has a small farm animal area next to the market. The kids can take a peek at the animals--chickens, goat, pig, cow, etc. It doesn't cost anything. You can stop on your way in or out of town. Holly Lake Campsites (down route 24) has a petting zoo on location. I have visited it a few times even without camping there--just call ahead OR talk to the registration desk. They also have pigs, goats, turkeys & etc. IF you think the kids would be interested in seeing an old lightship, check out Lightship Overfalls in Lewes.
As far as restaurants go:
I would recommend Big Fish in Rehoboth. It is pretty family friendly. Plus they have paper tablecloths & give you a cup of crayons. That should keep the kids busy while waiting on food. They have a kid friendly menu with hot dogs, chicken fingers, spaghetti & meatball, fish sticks, meatloaf, etc. http://bigfishgrill.com
Another place that I think is pretty family friendly is the Cottage Cafe in Bethany. It is a little bit of a drive from Rehoboth (about 30 minutes south), but the food is pretty good. They also have a kids menu with burgers, fish sticks, chicken, pasta, grilled cheese, meatloaf & their DELICIOUS pot roast. IF you go, definately get the Sand Dune fries for the family to split! http://www.cottagecafe.com/
Hope this helps some!