To answer question re waterfront campground, we stayed at Linkletter Provincial Park in PEI on the south shore a couple of nights. It's not really a swimming beach but fun to see the tidal changes. You can walk way out on the mud flats at low tide. The CG itself is really just a grassy field with electricity hookups, but friendly folks. Fairly close to the Confederation Bridge.
I believe the National Park on the north coast has campgrounds and there are pretty swimming beaches on that coast. Water may be colder than most of us southerners are used to.
We loved the New Glasgow Highlands RV park another poster mentioned. I would stay there to explore the island and make day trips to the beach and sights. There are a lot of family friendly activities in that Green Gables area.
Don't know the answer on the kids and passports.