We stayed there a few years ago when we took the kids on the Grand Canyon Railway's Polar Express. The hotel was fine, but it was nothing extraordinary. It was more of a matter of convenience, but if I had my druthers...I'd stay in Flagstaff. The Little America Hotel in Flag is great during the winter for the amount of acreage you have to play around in.
As part of our Polar Express package, we had vouchers to eat breakfast and dinner at Max and Thelma's. I'm not sure my taste buds have recovered from their pseudo Thanksgiving Dinner.
We're thinking of using some of our Girl Scout cookie money to take the train to the Grand Canyon this spring, and if we do...I'm sure we'll spend a night in Williams again. Out of curiosity, do you think the dome car would be worth the expense for a bunch of 10-11 year olds? Is the space more limited or does it provide for more elbow room that the regular cars?