M.H.
Hershey Park is a fun place for kids. I was born and raised in Hershey, and had season passes to the park for years, so we did it quite a bit (plus living 5 minutes away helps!).
It isn't a "must do" with young kids, but they will enjoy it. There are tons of kid-friendly rides and lots of really great roller coasters (if you can get your sister and boyfriend to keep the kids to ride some). There is also a place right next to the park called Chocolate World where you can see how Hershey's Bars are made. It's free and you get chocolate at the end. You can take a trolley through town for a small fee, and with your park admission you get in to the zoo for free as well. It isn't the most amazing zoo ever, but it's a nice little place.
My son (almost 5) LOVES when we go back to Hershey to visit, and honestly, we will probably move back within the next year or two because it is such a nice, small town. As for places to stay, please PM with what you think is reasonable. There are some great places in town, but I know New Yorkers who think that $350 a night is reasonable, while others think its astronomical. Actually, feel free to PM me with any other questions you have...I kind of know the place well! ;)
P.S. If you have a free moment (and a little extra cash lying around) the Hotel Hershey has a world-renowned spa that is like no other! I highly suggest it.