Our family just spend a couple of weeks in Panama.
Bocas was fantastic, also recommend Boquete and the Azuero Peninsula.
We did few tours and some activities by ourselves.
Activities my family enjoyed (specially the kids):

Sendero Panama tours: Their guides were fun, knowledgeable and knew how to guide for families and kids.

Wildside of Panama Canal
The embera tribe visit.
Bike ride in San Lorenzo Nat Park.
Nature walk on Boquete.
A day in a deserted island. (Pacific snorkeling and beach time)
Visit to Ngobe trive and chocolate making in Bocas del Toro.
Visit to Ngobe tribe for nature walk in Bocas del Toro(posion dart frogs and monkeys.
Snorkeling different reefs with natural history of reef, fish and creatures.

Boquete Tree trek: Mi family enjoyed this activity, specially the kids.
Zip line

Panama rafters:
River rafting

Hope you and your family enjoy Panama as much as we did.

Although a little pricey, Red Frog Beach resort in Bocas del Toro is great for large families. You can rent a whole luxurious house with a private pool. There's a very casual cafe there with ping pong and other games for kids. Turtle Beach was practically abandoned. We had a great time there with our young son. You can get there fairly easily taking the shuttle from Puerto Viejo.

In Arenal you would probably enjoy the Proyecto Asis animal rescue center where you can get close to monkeys, sloth, macaws, and other animals and help feed them. The waterfall hike is great too if someone can carry the two year old. Nice natural hot springs in the area like Eco Termales. I don't know of many houses in the area, but Silencio del Campo and Los Lagos are very popular with young families. Check out Tulemar Bungalows in Manuel Antonio.

I second tulemar bungalows, particularly villa mot mot which tends to rent for less and is fantastic. great beach for kids, kitchenette and great service.

Thanks for all the help. Any one have thoughts on Puerto Viejo with kids?

I recommend the Tulemar properties too! They have a private beach with boogie boards and kayaks for your use, tons of wildlife on site - monkeys, iguanas, birds, sloths etc. Check out www.4tulemar.com. I also recommend Red Frog Beach in Bocas it is absolutely gorgeous! There is also a restaurant on-site with kid-friendly food options, and chairs, umbrellas, and boogie boards for rent.

Puerto Viejo isn't as popular with families, but hipvirgochick takes her daughter there and they love it. Banana Azul is a popular place to stay. Maybe do a search for that and see what comes up if no one else chimes in.

We just went to PV with our 4 year old this past February. We loved it. So many great beaches to explore. I'd recommend a car with kids. You can read my trip report on here. FYI Banana Azul is adults only.

I wonder if that's new because I just read her review of staying there with her 10-year old daughter. I know they liked visiting the sloth rescue center when they were in the area.

Interesting- maybe they made an exception. It states on the reservation page that it's for 16 yrs and older.

mad, coincidentally I was on tripadvisor and colin stated that it was a new policy because they decided to cater more to adults and couples. People who have kids but had stayed there before were disappointed because they loved it. It's funny because someone just happened to ask the same question.

Too bad they changed it before we could get there! It would've been my first choice, but I have to say I'm glad we stayed where we did, as the beaches were more suitable to young children.