Hi pinkbabytots,
My wife and I went to Madeira a couple of years ago. We had a hire car and travelled all over the island and we loved it.
However, we don't have children and we found it very quiet and relaxing. That's one feature of Madeira and it's very popular with couples looking for peace and quiet. The island doesn't really cater for the bar/club/amusement park/beach holidaymaker so there might not be so much for kids who want Entertainment on a Plate.
It depends very much what you are looking for but we loved Madeira. The island is beautiful. There are lovely walks intop the interior and along the remote coasts and you can visit lava caves and tranquil villages and harbours. Funchal is a lovely city too and easily explored on foot. Try the wicker chair ride down the hill from Monte church.
Hope you have a good time.