I wouldn't really recommend it for 18 month olds. It's ok, but i wouldn't make a special trip unless i had older kids.

Skybus and tram, is pretty easy. You catch the bus out the front, it will drop you at southern cross then just ask for directions. You can even walk, it's only about a 5-10 walk. Not sure how'd you go with toddler and bag. But if you had a carrier and a wheelable bag it would be easily do-able.

We stayed at apartments @ docklands. If you check out wotif, there are actually a few places with apartments down there. Where we stayed is half privately owned and half rented out. It was quiet, well equipped and had a lovely view.