Curry Village in the Valley has all sorts of things you could do, including renting bicycles, or just walking around. You could also take the free public bus, and have it loop you around the valley. You hop on/hop off at any point on the bus. It does it get crowded in the summer time, and body odors can be noticeable. I would take the kids over to Swinging Bridge in the Valley, and let them wade in the river for a few hours. There's an area across the bridge to sun bathe, while watching the kids play. There are two parking spots leading to Swinging Bridge.
Do the 5 minute walk to Bridalveil Falls from the parking lot. Do the 5 minute walk to the base of Yosemite Falls.
Do drives to Valley View and Tunnel View. Those are iconic viewing spots in the Valley area. You must also do the 1 hour long drive to Glacier Point (or you can hike it up from the valley, which I don't recommend if time is short and you have kids in tow). Glacier Point has beautiful views of the entire valley, including Yosemite Falls, Half Dome, Vernal Falls, Nevada Falls, etc. It is basically directly above Curry Village.
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The Ahwahnee Hotel
Yosemite Valley Stable Thanks for all the helpful answers to my initial question. We didn't get to all the activities suggested, but here are some of the things we did:
Stayed at The Ahwahnee Hotel - a great (pricey) experience. The kids enjoyed the small pool. We loved the views and the grounds. The signature piece of this hotel is their grand dinning room - it is absolutely magnificant. I visited Yosemite when I was 8 years old and 30 years later, it's as magnificant as I remembered. Even if you don't stay at the Ahwanee, you should make it a point to have a fancy lunch or dinner there.
We walked from the Ahwahnee to Curry Village where we saw the one hour play, "Ranger Ned." Very minimal investment activity, and I think I laughed as hard as the kids. Even in busy summer month of July, there were plenty of seats. After the play, we rented a raft (just around the corner) and floated down the Merced River. Outstanding views of Half Dome and Yosimite Falls, 2-3 hours, and bus ride back to Curry Village is included.
We did the "Night Crawl" guided tour. With a somewhat large noisy group, there was little chance of seeing much wild life. We did hear some bats, and the tour guide explained how they use echo location. She also pointed out some constelations and stars, which I always enjoy. The highlight of the Night Crawl for the kids was biting into breath mints towards the end of the hike and seeing "sparks" in each other's mouth. I believe this was compared to the phenomenon of when granite rocks fall and hit one another, creating a similar spark (don't quote me on this).
We also attended the Star Gazing tour (packed our own wine and definitely bring blankets). Kids ALMOST fell asleep, but adults enjoyed it. Spoted a large buck before we started the tour, so that was the highlight for the kids.
Lastly, our daughter loves horses, so we did a 2 hour "horseback" ride (mostly mules) up to Mirror Lake...which wasn't much of a lake at all. Still, it was a very pretty (and dusty) ride. You might want to pick up some Yosemite handkerchiefs to let the kids where over their mouths. They should sell these at the stables, but they don't. On this ride, I learned that Mules are VERY skitish - scared of all louder than usual sounds, squirrels, campers folding tents, water...basically, the same things they see everyday. Important to listed to guide's instructions. Not recommended for small uncooridinated kids, or kids who don't listen well (HA! I know that seems like most kids). Luckily, my kids listened well enough to always hold on to the reins. Another kid on the tour didn't listen so well, and fell of his horse...I mean mule. He was not hurt, but still pretty scary.
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I'm planning a Yosemite trip, too, so I'm not exactly an expert, but I happened upon a post on the park website that advertises night trips through the park with a guide to see th sights by moonlight and stargaze. It sounded amazing. Here's the Yosemite info: http://www.yosemitepark.com/moonlight-tour.aspx