On a boring conf call, so here goes 
Just to clarify, there are basically 2 school systems open to you
- The international schools: there is one for pretty much every nationality, and although they usually give some preference to nationals, most are open to everyone, and they usually have a fairly high proportion of local students as well. Where it gets confusing is that they all operate their waiting lists in different ways (some are selective, some arent), and it isnt always very transparent. Debenture holders and siblings get priority. They also take the children at different ages and have different cut off dates but most run a reception year, so children start in the September after they turn 4. Best bet is to look on their websites/email them. Off the top of my head, the ones on the island are the french, Kellett (British), Canadian, German-Swiss, HKIS (American), Hong Kong Academy (for now- moving to new Territories in 2013). Australian school has a good reputation but is on Kowloon side.
- ESF. A HK peculiarity but possibly your best bet! Set up after the 1997 handover to provide English medium education at less than international school prices, these are fee paying schools but cheaper than the international schools as they get a government subsidy. Class sizes are larger. Some British parents say that they are comparable to a "very good british state primary". These dont have wait lists. You apply in the September before your child is due to start and they start in the September of the calendar year in which they turn 5 (the cut off is 31 Dec). Therefore you would apply this September for September 2013. There are several and they operate on a catchment system so you apply to the one where you live (can stay there if you subsequently move though). They give priority to children who dont speak cantonese but there are still not enough places. Bradbury seems to be the worst in terms of over-subscription, so if possible try to avoid that catchment.
-In the meantime, as has been mentioned above, there are several pre-schools- Woodland and Sunshine house being the larger ones- that plug the gap and try to alleviate the shortfall of reception places.
- It's worth mentioning that you are entitled to put your girls in a government school (Cantonese medium). However, this is very unusual amongst expats, especially short stay ones.
In terms of where to live, there are many possibilities, highly dependent on budget and preferences. The island is the most expaty, with expats mainly clustered in mid-levels, Happy Valley, Pok Fu Lam and the Southside (Repulse Bay through to Stanley/Tai Tam- Chung Hom Kok is a nice "cheaper" bit of the south side). Off the island "Discovery bay" on Lantau island is popular with families, as are Clearwater bay and Sai Kung in the New Territories. Once you go off HK Island, you get much more for your money but it's more rural/ longer commute into central. On the island, unless you can afford more than HK$90k per month in rent, you're most likely going to be in an apartment
In terms of apartments, you need to decide between the colonial style blocks (apartments tend to be larger but no facilities) or the newer apartment complexes (eg Bamboo Grove, Bel-Air, Park view, The Repulse Bay, the Manhattan, Pacific View) which have smaller appts but on site facilities such as pools, children's playrooms.
Considerations re this include if you're working and if you'll have a club. I work and we dont have a club, so we chose to live in an apartment complex to have access to a pool/indoor playroom and as it's far easier for my helper to have all the facilities right there, and to be able to sort out playdates etc within the complex.
HTH