Malaysia is really good with kids and Malaysian Airlines is fine. Hotels are cheaper in KL than in Singapore too so you can stay somewhere more upmarket. Traffic is more congested by the public transport is really good especially the trains and light rail.
We splashed out and stayed in the Hilton in Brickfields (Little India area) and it was fantastic (kids still rave about the water slide and the tv screen in the bathroom). More a business than a family hotel but our kids loved it. The staff were great too and the restaurant catered really well to young children.
We didn't do too much cultural in KL as we went there after several weeks travelling in more remote parts of Malaysia so just wanted to relax and shop and EAT (food in KL is fantastic). The Petronas towers seem to be the big thing that everyone wants to do. There is also a good elephant rehabilitation place but that is more of a day trip from KL (we stopped off there en route from the East Coast). I think the bird park in KL itself is meant to be good and there is also an interesting Hindu cave yiou can go to (sorry, can't remember the name). I also remember going to a cultural night performance one time in KL but this was a long time ago (pre kids) so don't know if they still have them.
Edited by: empressnasigoreng