FrontierTowne in OC, MD is perfect for your kids. The drive is decent. Yes there is traffic in the Summer but in general it is not miserable.
There is a water park at the CG that is free to campers. The beach is a 10 minute ride away at Assateaque state park. There are also wild ponies and other things to do at the state park. OC,MD is about a 15-20 minute ride. Boardwalk amusement rides etc.
The CG also provides a shuttle bus to OC, MD and to Assateaque.
The CG is located on the bay. There is a wild west show and zip line park at the CG as well. Great place that is a relatively short drive to home.