See what you think of these.
Not Monterey, but slightly north - Capitola. Not sure on hotels, but if you're willing to go upscale, try a beach rental via something like VRBO.com. There are great beaches there, cute communities, and Monterey aquarium is not far (Dennis the Menace Park, I think it's called, is very cool). Plus Santa Cruz.
South of Big Sur is Cambria. Again, good place for a vacation rental.
More south, Pismo Beach (definitely nice hotels, restaurants and cute shops, right on the water) and San Luis Obispo (10 minutes inland). We did the Madonna Inn last summer and that was really fun, but my girls are a bit older - the heated infinity pool was worth every penny. Thursday nights are Farmers Market night in downtown San Luis, and there are face painters and such. There are a lot of kid things to do in SLO and surrounding areas and great parks. Nearby Avila and Pismo have the beaches.
Closer to bay area is Half Moon Bay. Ritz Carlton would fit the bill for the hotel, there are miles of beach, plenty of restaurants, Downtown Half Moon Bay is fun to wander. Monterey Bay Aquarium a bit of a drive, but not terrible.