You might consider these hotels,3 stars but beautiful and meet your requirements, I guess
Danang:

1. LION SEA Hotel is located at My Khe Beach, Trương Sa Street, Danang City. This 3-star hotel is with a beach-view, modern and elegant architecture

2. Little Home 2 Hotel is located in the central of Da Nang. It normally takes about some minutes to walk to Han River and 10 minutes to reach the Da Nang International airport.

3. KAY Hotel is located on the banks of the Han River.
It takes 10 minutes by car from Danang International Airport or from the Danang train station to the hotel.
From the bedrooms of the hotel, you can admire the beauty of the Han River or the landscape of the coastal of Danang City.

Hue:

1. Gerbera Hotel Hue
2. Century Riverside Hotel Hue
3. Festival Hotel

If you really would like an atmospheric place to stay in Hoi An, in the old town where there's no traffic, try Vinh Hung Hotel at 143 D Tran Phu.

Ask for the bedroom where the Michael Caine version of "The Quiet American" was filmed. We stayed in it about 10 yers ago, the balcony off the bedroom looks out onto a scene from the film, red lanterns, quiet cobbled streets, the bedroom has a wonderful four-poster teak bed with mossie netting, and our kids fitted in quite nicely.

Don't let them book you into the modern hotel at the back.

BTW, if you're staying in Saigon, splurge at the Majestic. We stay there every time. Unbeatable.

How is the Majestic "unbeatable"?

I stayed in the bedroom mare describes above at the Vinh Hung and loved it! It is stuffed full of Vietnamese and Chinese antiques and it is the only hotel in the old town which is the place to be in Hoi an but it is a bit dark and maybe not the best place for your children who might find it a bit spooky!

Danang is not a great place and I wouldn't stay there unless absolutely necessary because of transport times etc. rather than drive to Hue, I would go by train. It is one of THE train journeys of the world as the track winds along China Beach and through manybtunnels the marble mountains. A great way to meet some local Vietnamese people.

The imperial citadel in Hue is great but don't miss out on some of the outlying tombs around the city.

thank you all! will check out hotel options.

Do any of you know of any good guides for Hue /

And how do I book a train ticket ? Can't find a link on the web to order.

Thanks

I don't think you need a guide in Hue or anywhere in Vietnam as long as you are willing to read up on the place.
There are many tombs there, you can choose a couple + the citadel to go to. They were quite interesting. To save time, you can book a driver from your hotel and have that person take you from place to place.
Instead of taking a taxi, I booked car service from my hotel to take us (2 people) from Hoi An to Hue, it was about US $50( I bargain) 4 years ago via the Hai Van pass which was a longer route. It was a waste of time and money at the end, I saw nothing due to the foggy weather.
To go to My Son, I booked the ticket(bus + guide) the day before in Hoi An, no reservation required at that time. I don't know if kids would like that place. You might want to ask info on rest stops before you put you kids on the bus.
For train tickets: http://www.travelfish.org/feature/117
other info, check this: http://www.travelfish.org/country/vietnam.
Hope this helps.

Most hotels or hostels will book train tickets for yo on arrival ( some for a small fee). From memory, I think we booked ours at the train station the day before. I have done the danang - hue trip twice, once by car over the Hai Van Pass ( saw very little!) and once by train and much preferred the train. Moran is spot on with comments e the weather which is notoriously wet in this part of Vietnam..likewise with comments re needing a guide. A guide book and a taxi is and it is easy enough to find your way around. An interesting alternative would be a bicycle tour which is easily booked at many place in Hue.