Hi, We live about 35 min. from Dollywood. There are so many hotels and we don't ever have to use one so I can't help on that front, but I can't think of anything to avoid. There are lots of things that are fun though. Dixie Stampede is lots of fun for all ages. A little pricey, but you get fed and entertained. The Dollywood Splash Country, next to Dollywood is a great way to cool off on a hot day- don't forget your swim suit.
Between Pigeon Forge and Gatlinburg, and in Gatlinburg there are lots of hiking trails, some fairly easy for little ones, some more difficult. (Of course you don't have to go very far on any of them if it's too much for small people) There are many "pull-offs" with info on the area and little areas to explore, including little creeks.
Outside of Gatlinburg, on Hwy. 321N (towards Cosby and Newport) is a great park called Greenbrier. In it are hiking trails, picnic areas and the headwaters of the Little Pigeon River. Some people swim or tube in the lower part near the entrance. It's way to cold for me, though. We just enjoy the sound of the water and sometimes dip our feet in. We have seen bear, turkeys, deer and other wildlife there.
Another super great place for wildlife is Cades Cove. It's a short drive from Pigeon forge and has a driving trail around the whole place. It has old, early settler buildings with historical info. and you will see LOTS of wildlife. We have never been without seeing bear, turkey, coyote, deer, etc. There is a place, about halfwayaround the loop that you can stop for all kinds of info on the cove, see a working mill grind corn, see the inside of an old home, and get info on the local wildlife. (If you are there and the traffic is backed up and no one is moving, it is called a "bearjam". It means that there is a bear and people have stopped to look. Many get out of their cars for a closer look or a picture. Do the same, without getting too close- it's worth it and you wont be moving until the bear is gone anyway.)
Of all the more commercial stuff, don't know any to avoid, but if you do the wildlife stuff, avoid encouraging bears to come closer!
Have fun-it's also a great area to live if your not too close to the busy areas!