Cars and driving in Malta isn't as bad as it used to be. I went for work about 20 years ago and then it was terrifying, but it doesn't seem as bad now. At least they drive on the same side of the road as us, with RHD drive cars, so that's two fewer unfamiliar things to worry about compared with the rest of Europe.
I agree with the advice about Mellieha (Bay that is, Mellieha itself is the (nice and worth a visit) town up a very steep hill) but as for whether it is worth hiring a car depends on how much sightseeing you want to do and what you want to see.
If you stayed in Mellieha Bay, you could get a direct bus to Valletta (you don't want to drive there because, parking), which is worth a visit, you could also go on a boat trip to Comino (small unihabited island between Malta and Gozo) for the Blue Lagoon, good for swimming/snorkelling (sadly overrun by the instagram crowd because it is beautiful) and you can walk around the island.
You could also probably get to the Gozo Ferry port quite easily by bus or taxi as it's only a few miles and spend a day on Gozo, possibly using the hop on hop off bus (there's a timetable but it's only a suggestion of when the bus might come and I don't know if practically you could see everything), or maybe hire a taxi to take you round the island.
There's some sort of Popeye themed waterpark at the north end of the island too, which would probably be fun for young DC.
So you might decide to do those things and stay locally the rest of the time and not need to go anywhere else, and not get a car, or only get a car for a day or two. There are plenty of buses, but they're very slow - we stayed in Sliema and wanted to go to a few places and everywhere was 60-90 mins by bus even when it was only a few miles.