Hi Katrina
We moved to Lake Maquarie from London a couple of months ago and we really like it. We never considered Sydney as we left London to escape the exorbitant rents.
Pretty much, the whole east side of the Lake is a good place to live, we also have 2 children (ages 1 and 3)
Caves beach and Valentine are nice, we are at Warners Bay at the moment which is really nice. Belmont, Eleebana and Speers Point are good places to raise children aswell and right next to the lake.
We are renting now, but when we buy we will look in the Swansea/Blacksmiths area as you are so close to both the Lake and the beach and the prices are the most reasonable on that side of the lake.
All the schools seem fine to us and all of a good standard.
Feel free to send me a message if you need any further information about the area.
Richard