Phuket is fantastic, went 2 1/2 years ago and stayed in the northern end of Patong, loads of restaurants (Hard Rock Cafe, Hogs Breath, Irish Pubs, Theme Restaurants galore) oh yeah and some Thai ones too. We did elephant trek, ATV, Tour of Temples, Shopping days, Water Park, Cave Canoeing, James Bond Island, Simon Cabaret, Fantasia show, Mu tie fighting (maybe not with kids) and a ping pong show (definitely no for the kids). The beach at Patong is seriously crowded, and street sellers can get on your nerves, but many hotels are really nice, ours had 2 pools, swim up bar and even a bowling alley, it was called Graceland.
Even this year I went on Honeymoon to Phuket, stayed in a private villa in Thalang, not anywhere near as busy as patong, and certainly didn't have the seedier side of Thailand. Just spent 2 perfect weeks in a private pool, then eating and drinking too much every night.
I have heard other islands are very nice also, just quieter.