Is the Cape Town Best Western a good place to stay (for 2 adults and 2 small kids?) I'm mostly concerned about location.
We will be coming from the Garden Route so will arrive with a car. Should we keep the car for the duration of our time in CT?
I have a bunch of air miles I can use to get mostly useless stuff, however I can get lots of Best Western gift cards. Are there many along the Garden Route? Are they soulless? Is it better to pay for guests houses?
We're going at the start of April, do I need to pre-book accommodation?

I vaguely remember seeing this place when I was there last March. Most Best Westerns are fine that I've been in in other places so I'm sure this is OK and your gift cards will make the price right. Go to the Best Western site to find other locations.
As to cars--I rented mine the last day I was there. I didn't need it in the city proper but it would have been useful for going to such places as Kirstenbosch Gardens. However you can always cab it or take the sightseeing bus.
I was there in March and I pre-booked hotel reservations. Not sure this is absolutely necessary.

The Best Western in Cape Town used to be flats. That's when I've last been there. But I guess they kept it the same way, and if you get accommodation with two rooms, it will be spacious.
The location is great, if you keep the car. It's not really walking distance from where you would want to go, especially with two small kids. A car would make your stay more flexible.
The South African school holidays is from end of March, until mid-April. Pre-book your accommodation.

Definitely keep the car!
You say location is important -- the Best Western is in the City bowl but it's not walking distance to anywhere at all, not even a restaurant. It's pretty soulless but if you have vouchers, probably a good deal.
I know of no Best Western on the Garden Route. Better stick to guest houses, or Protea hotels. Here are our family favourites up there: garden route accomm
School holidays are 21 March to 13 April 2008. If you are going to be around those dates you need to book for CT and the Garden Route.
How old are your kids? Mine are 5 and 8, so here are some suggestions of family things to do.