I lived in Shanghai for two years (left last November, when DD was 10 months old).
Right, where to start?
We lived in a lovely Art Deco flat in the middle of the French Concession. It was great before DD came along, but quite isolated after I had her because it's where the young single expats live. Great restaurants and bars, but absolutely no facilities at all for children (to the point that there was only one supermarket I could go to, as all the others had steps to get in the front door).
All our friends were childless couples who also lived in the French Concession, but I gather that other people with kids were much happier in the expat compounds out in the suburbs. There were lots of playgroups, compounds with playgrounds and swimming pools etc.
How long will you be going for? If it's any length of time, you'd better get both kids on the list for schools the moment you arrive - I gather they're terrifically oversubscribed and competition to get a place is savage. I have heard of more than one mum re-training as a teacher to get a job at the school so her kids could get places. Dulwich College has a campus in SH, if you're planning to stick with the UK system and not the IB system.
Shanghai Expat (www.shexpat.com) is quite informative, if I've remembered the URL correctly.
Your DH should absolutely insist on a package including: housing, private health insurance for all of you and any future DCs (a visit to the private paediatrician is about 150 quid), relocation, annual flights home, a European or American car and driver (taxis don't even have seat belts, let alone anchor points for car seats, and you won't be allowed to drive unless you get Chinese licences) and all nursery and school fees including any debentures you may have to pay to jump the waiting list.
Any other questions, fire away. I'm afraid I absolutely hated Shanghai but I think it was largely the loneliness of being stuck at home with a newborn. I know loads of people who adore it, so don't be put off if any of my advice seems coloured by my own experience.