I've lived in Germany for the last 19 years and my children go to bilingual schools, so we encounter plenty of two/three language families.
I think in your position, getting your kids to speak German actively is probably a step too far at the moment. However, it is realistic that they will understand it passively (and respond to you in English) if you talk to them consistenty in German - but then when they are put in a German environment, for instance alone with your parents, they will miraculously be able to communicate in German, admittedly with a lot of language interference.
Kids need to be motivated to speak a language, and the best motivation is communicating with other children (who can't speak English, for example).
I've given the following advice before, I think, but no harm in repeating it:
If you're near to Kingston and can afford it, there's the German school. Now THAT will gets your kids active in the language like nothing else.
One option might be to book a holiday somewhere in Germany/Austria where there is a German-speaking holiday club for kids. Do you have cousins in Germany with kids of similar age? Can you get them together with your kids.
With German toddlers' group do you mean the Samstagsschulen? In what respect is it terrifying? Is it full of super-confident power mummies?
There's a radio station for kids called Radio Teddy, which is available on Astra satellite and via Internet. You could have that on in the background - they play LOTS of German songs again and again and again...They also love hearing about their listeners in other countries. Warning: it's based in Berlin, so the variety of German spoken is a bit, er, coarse.
My kids love the KIKa website (KinderKanal on TV), which has lots of fun harmless activities and videos for younger kids. You could introduce them to Die Sendung mit der Maus!
Viel Erfolg damit!