I remember when i worked at the Sheraton i set my parents up at that resort for $75. (employee rate).
They loved it, they had access to like 5 resorts that were all beside each other. It really is a fantastic place to visit.
http://www.phuket.com/sheraton/
While a lot of us talk about the ladies in Thailand I saw quite a few families in Phuket. Actually, there is only one street (Soi Bangla) that has the bars. The rest of the Patong Beach area is mostly small shops selling cheap goods. Lots of fake watches but also lots of quality tailors. I bought 6 custom-made shirts for $97 in 2006. I still wear them today.
Other things you can do there is parasailing, snorkeling and scuba diving(the water is very warm in the Andaman Sea being so far south). Phuket is one of the top scuba diving places in the world.