While I have not been to Mexico with two small children recently (the kids have grown up a bit). We did travel to Cozumel when they were young and we found it to be a great vacation.
Traveling with kids is a different experience than just traveling with a spouse or friend, but it can be just as or more rewarding -- but in different ways.
As others have stated, you might want to stay away from long hikes in the hotter, drier areas, but there is still plenty to see and do. You also know how you kids handle things and what kind of stamina they have, so rely on your instincts and you will be fine.
Don't forget to enjoy some fine cigars while you are down there
