Is your DD starting school in 2002? When are you thinking of going? Where would you like to go? Do you want child care while you are there? Haven't you even had a holiday in the UK? Babies are pretty easy. My kids have been all over the place, including into Morocco without the correct visa's, they were not trouble. However I wouldn't go anywhere too challenging unless it is firmly for you.
Do you want a package with everything included? Or do you want to book everything in separately? You could do self catering, although then the 'catering' amount is an unknown quantity whereas a package can include everything except say alcoholic drinks.
Do you want beaches and very hot?
If you are feeling nervous you might want to look into what travel agents offer, some have some good package deals and they will organise most of it for you. Some of them have lovely activities that the family can all enjoy, including your older DD and she might make some friends.
Otherwise you could do something like camping in France? But if you get a ferry over remember that you'll be driving your car on the 'wrong side of the road' which can be really challenging if you aren't used to it.
Is food important to you? As this may impact where you go!
Don't forget all of you will need passports and make sure you have a dummy or a bottle for the baby and a lolly or something for your DD if you are flying - this will stop their ears hurting when landing and taking off.
We've always gone self-catering but eat out quite a bit.
We usually have the main meal of the day in a restaurant and then just do breakfast and another snack meal (bread/ham/cheese etc) ourselves.
We stayed in one fab apartment in Greece where we had a very small 'kitchenette' but there was a restaurant within the complex as well. I wouldn't recommend that particular one to you (awkward location) but am sure you could find something similar.
Personally i woudl book in advance just because with kids you are less flexible in terms of the type of accommodation that you want. And I'd want confirmed dates ahead of time as there is more planning involved than when it was just two adults hopping on a plane.
Usually you pay a non-refundable deposit at the time of booking and then pay the rest a month or two before you travel. The size of the deposit varies quite a bit IME.
We tend to book flights and accommodation separately just because we're normally looking for accommodation off the main tourist sites, but all the main holiday companies will offer something like what you want.
Or you could try Eurocamp/Siblu etc if you would consider moblie home type accommodation. These places are very family friendly.
I would go to a couple of websites and request a stack brochures to look at. Much easier than trying to look at stuff online IME.
I would definitely go self-catering, that way you are not tied to hotel breakfast/lunch/dinner times and you can feed your DCs what they like which may not be what the hotel offers!! Also an apartment gives you more flexibility - if the DCs are having naps you can chill out in the living area.
We've been to Menorca a couple of times and loved it, it's only 2hrs flight and most of the resorts are very quiet and child friendly. It's very hot during July and August but if you are going during school term time it will be reasonably priced and good weather. We've booked with Thomson this year and the flights are a decent time of day too - which means you are not getting up in the middle of the night and feeling exhausted before you even get there!