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Portland is an amazing city. Tons of cool cafes, local micro-brews, and the bars and restaurants all have a great vibe. Not sure how good it would be for kids for an extended vacation. However, it's very close to the Oregon Coast. Small towns like Seaside are a lot more family orientated. You'll find great things for the kids like old fashioned candy shops and western themed restaurants. Not the cheesy kind of Western either.

If you like seafood at all, the Oregon place is also the place to go. Cheap and amazing Oyster and crab shacks abound.

If you're going with the family for a week, I'd recommend 2-3 days in Portland and then drive down to the Oregon Coast and visit the plethora of cozy beach towns.

Edit: Just saw the comments above. He's right downtown Portland sucks. Portland is a very poor city and the downtown reflects that. It's the smaller beatnick areas in Portland that you want to check out. Seattle has a vibrant "club" scene downtown, by there isn't much more going on outside of that. The city as a whole has a much more plastic feel to it. The best way I can describe is, Seattle is a Starbucks and Portland is a local no name cafe.