Yes, Disney World would be too crowded over the holidays. I can't see spending over $60 per person to wait on line for 2-3 hours per ride.
But the Orlando area is still an option, because there are tons of other things you can do there besides Disney World. Here's some ideas:
1.. Go to old Old Town (www.old-town.com) in Kissimmee. They have a bunch of rides there that you won't have to wait in line for. $20 wristband gets you unlimited rides. For go carts and bumper cars, Fun Spot is a great option as well (www.fun-spot.com).
2.. Have breakfast with the Disney characters. Several Disney World resorts have a buffet breakfast where the Disney characters wander by while you're eating. HIGHLY recommended if your kids are young. We did the one at the Contemporary Resort. About $20/person, but reservations are required. Allows you to visit Disney World without the cost and lines.
3.. Do one of the dinner shows. I like the Pirates Adventure the best, but there are plenty of others - Midieval Times, Arabian Nights, Capones, Dixie Stampede, etc.
4.. Walk up and down International Blvd - lots to do there. For kids, I would check out Wonder Works (the upside down building)
5.. If you've got too many family members to fit in one hotel room, then rent a vacation home. Cheaper than 2 hotel rooms and let's you cook your own meals, saving you money. Also gives you a private pool so the kids can go wild without bothering anyone. You can find one at www.floridagold.com, www.sunstatevacations.com, www.hayesvacationrentals.com, www.disneyfloridaholidays.com, or www.disneyorlandohomes.com.
To find more ideas, there's a good directory of information at www.myflavacation.com/orlando.