This sure does sound great! I may be a bit biased (being from south africa) but I really do believe that there is something for everyone there and therefore such a perfect place to have a family holiday/reunion.
In Cape Town, there are different areas to choose from. The waterfront is more the touristy area but still very pleasant and worth a visit. Nearby you have plenty of restaurants to choose from and if you were interested in doing a trip over to Robin Island or even just heading out on a Sunset Cruise, this is where you would depart from. (There is more 'hotel-style' accomodation here as well as serviced apartments/aparthotels).
You then have Greenpoint and Seapoint which lead you from the Waterfront around the bay to Clifton and Camps Bay areas. There are usually great villas or family homes to rent in the hills or higher up Seapoint. (I would also always recommend hiring a car in SA, especially if you have kids as this is the easiet way to get around). Further recommendations on areas to stay would be Bantry Bay, Fresnaye or even Camps Bay, although Camps Bay is on the other side of the mountain to the CBD. Sometimes traffic can be a pain if staying here but if you dont mind driving an extra 15/20 min around the bay or over the mountain the sunsets are fantastic!
If you dont actually mind being a little way from the main hustle and bustle of Cape Town, Llundudno is further along the coast heading towards Hout Bay. Once again you will see many very large holiday homes here and I am sure many of these get rented out. Otherwise you could stay in the wine region as well (Stellenbosch or Franschoek), however these are a bit further away once again. I would say base yourselves closer to Cape Town and then perhaps do day trips to the Winelands or the Penguin beach (Boulders Beach).
Hope this info helps