I've been at a wedding this weekend, with my toddler twins. The bride and groom went with the 'embrace' option and went out of their way to include the children of all ages. Their info sheet (with the invites) made it clear that they were happy for children to be children and that they didn't expect silence during the ceremony, and the church had a little kids area with books and toys, which parents and tots used as necessary during the service.
At the reception, they'd asked about food before hand and asked that people brought thier own high chairs. They'd put little gifts out for all the children to help parents occupy their children during the meal. There was two little rooms off the main room - one with toys and one with no toys but comfy sofas. The kids were easily entertained wandering about and in no way compromised the enjoyment of adults (I don't think!).
The whole wedding was relaxed, friendly and supportive. They'd planned things to make entertaining the children easy for parents, so none of them got bored (and therefore annoying).
If you want your wedding to be über smart and run exactly as you've planned, I would exclude children (and expect parents with your children to either decline the invite or leave after the meal). If you want your wedding to be a celebration of family life, include everyone and make it a party.
I've been to both types of wedding pre-children, and I always enjoy the child-friendly ones more 