Ocean City hands down!!

Ocean City is the way to go.

It really depends on what you want out of your vacation. If a boardwalk is something you want for entertainment, bike riding, etc. - then OC or Wildwood are definite options, along with Seaside Heights. We've grown to enjoy Seaside Heights just because it feels like we actually went away, aka we rarely run into anyone we know there. With your kids ages, definitely consider a trip to Storybookland if you go with OC or Wildwood.

For quieter beach vacationing, we enjoyed time in Surf City on LBI - house was beachblock, you can hear the surf inside of the house - short drive to Seaside Heights for a boardwalk trip.

Lately, we've become attached to Chincoteague, VA (okay, it's not Jersey, but it's just over a 3 hour drive so it's a viable option). It's quiet, has great fishing, pretty beaches - it's what we want for a beach vacation and very reasonable (it doesn't make the Caribbean a fair comparison like other shore destinations along the Atlantic Coast!).

The best advice is to try several in the next few years, we are blessed to have so many options nearby

Ocean City, Sea Isle City.

Both family oriented no real riff raff.. SIC has some college kids but lotsa police

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I second Beach Haven in LBI. My in-laws have a place there every summer and we love it with our 3 year old. Fantasy Island has an arcade and lots of kid friendly rides. Behind Fantasy Island is a water park with various water slides and wading pools. There are good restaurants and plenty of ice cream places and mini-golf. The beaches are nice and the area is pretty quiet. There's also an outside acoustic happy hour every weekend at the Engleside Motel that is great to go to with kids (not too loud).

Definately Vermont Avenue, AC. Cultural experience--priceless.

yup, ocean city.

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Freudian Slips: when you say one thing but mean your mother

My wife and I went to Smithville, NJ last weekend and it was pretty cool. Its by the water(not shoreline), but is more known for its shopping and colonial feel by the waterside-kind of like an old settlement.

They have a cheap bed and breakfast, a bunch of shops and eateries. It doesn't fit the OP's parameters, but anyone looking for a day trip might like the spot.
http://www.smithvillenj.com

Ocean City,NJ has become my summer spot. It is clean, nice, and I don't mind paying for the beach tag.