Family trip to Istanbul in July

Anywhere in or near Sultanahmet, Sirkeci or Gülhane. This is the main tourist area, which is where there'll be plenty of life day and night. The metro runs right through these areas. You will need to search individual hotels to check out views, but they are available. There are plenty of mosques nearby wherever you end up.

There are a few alcohol free hotels in Istanbul but surprisingly not that many.Here are a few I know of-
Rast Hotel,is a beautiful restored Ottoman mansion just off DivanYolu and so very close by Sultanahmet Square.
Near to the above hotel is Deluxe Golden Horn Hotel,also Islamic friendly.
Dareyn Hotel,in Aksaray 5 minutes walk from the tram and metro lines,this is a traditional neighbourhood,with several mosques close by.
There are other similar hotels but they are much further out of the city and so not really convenient for a holiday visit.All the above are in excellent locations with plenty going on,places to eat,shop and reach local attractions on foot or short tram or metro ride.Dareyn Hotel is in the least touristy neighbourhood.

For activities there are many things for children in the city.Panorama 1453,a surround screen show of the conquest of Constantinople,Miniaturk a park of all Turkey famous places in minature,Rahmi Koç Transport Museum is wonderful with great hands on sections for children-just don't tell her it is a museum and she'll love it :) lot's of lovely open parks for her too-Gulhane and Emirgan to name just two,Europes largest aquarium Turkuazoo, Fezhane Childrens Park,Faruk Yalçin Zoo,and of course she is sure to enjoy taking ferry rides up both the Bosphorus and Golden Horn.
Maybe choose a few of these and do one a day for your daughter to balance out all the shopping and historical sight seeing.As this will be school holiday time here there are sure to be various street activities/workshops etc. set up for children too,as they are announced I'll post them up.

Thanks. Very, very helpful. Really appreciate it.

Another location to consider is Kadiköy, the Asian side of Istanbul. It is less touristy but more lively than Sultan Ahmed, day and night with plenty of restaurants. You have the Kadiköy metro and ferry close by and you can easily reach the other side when ever you want. Nothing beats Istanbul ferry boat.

You can stay @ 5 star double tree by hilton. Listed on booking for 137 €. I have NOT stayed at this hotel but the map shows that it is very close to Kadiköy metro and pier.

(iskel camii or mosque, the metro station and the pier are 220 meters away from the hotel or 3 minutes walking according to Google map).

There are 3 mosques (including the iskel mosque) close by, within walking distance to the metro and pier, I know for sure because I used all of these during my stay in the area.

I will choose to stay in Kadiköy over Sultan Ahmed. But for a family I have to admit that Sultan Ahmed is closer to the tourists attractions, probably more convenient and has less commute. But even if you do end up staying at Sultan Ahmed please hope on the ferry and cross to Kadiköy and walk around the area across the street from the metro station. Also take a ride on Nostalgic tram to Moda district.

I must admit that the Asian side seems more intriguing and charming to me. I was concerned about the commute time, but was not aware that Metro was an option, apart from ferries and taxis. Definitely worth considering now. Thanks.

http://www.istanbul-ulasim.com.tr/media/24900/ag_2200px_1546px-01.jpg

This the Istanbul metro map. Kadiköy is the first station on the pink line M4

If staying on the Asian side appeals to you then what about staying in Üsküdar which is a northern neighbourhood of Kadıköy?I can find only one conservative hotel in Kadıköy but it is at Kozyatağı a rather indifferent business district and far from things a visitor would want.
Ahmd also knows Üsküdar very well and I think he too would agree this would be a nice place for you to stay.From here you have a choice of Marmaray,the under water metro, as well as ferries to reach the European side.Volley Hotel there is elegant,conservative, alcohol free and in a convenient location.
Having said all this I still feel that the European side will be better for you as a first time visitor and maybe just go over to the Asian side for a day visit.

I agree that Uskudar is a very nice place. It is better connected to the Europian side. I just did NOT know of any hotels :-) to recommend

I love the Asian side and would prefer to stay there but I would agree with Sarikanarya that for a family visiting Istanbul it is more convenient to stay at the Europian side where all the sites are located

Thanks. You folks are a goldmine of information. Really appreciate your help.

BTW, my wife and I have been to Turkey on a bus tour about a dozen years ago, and fell in love with the country and its people. Unfortunately, we were not able to organize another trip till now. It will be the first time for my daughter.