We went while in M.B. on a cruise. There were several ships in port so we knew Margaritaville would be packed. We spent the first part of our day at Doctors Cave Beach and had a great time (other review). Later in the afternoon we walked up the street, through a couple stores, and then I wanted to at least go into the store at Margaritaville. When we went inside I was asked "how Many" and my family of four (us and two boys 12 & 16) were seated upstairs next to the slide! The place was busy, but not packed at all. We had a great waiter, the food was good, the drinks were good, the slide into the ocean and the "water park" in the ocean were a family hit.
I am sure the place can get crazy, maybe even to the point where kids may be out of the question, but during daylight, especially when the crowds drop enough for easy seating, this place was a blast!