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Do you specifically want e-ink? It's a little more expensive, but a nook colour may be a good choice for kids. Touchscreen, easy to use, supports many formats, and has a colour screen which kids may find more appealing.
And for your youngest who you say may occasionally read on it for now, it does children's books very well.
If you don't want a nook colour and want a regular e-ink reader, I honestly think it sounds like you'd be pretty happy with any of them. The only thing it sounds like you really want is large format support, and in that case Kindle would be out of the running. The nook is the best of both worlds, with a great e-book store for the nook yet also supports many formats. But the Sonys are also great, and they make a 5" 350 which you seem interested in. And there are other cheaper ones such as Kobo which may fit your needs as well.
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