I lived in Malaysia for 3 years and have traveled a lot in SE Asia. Singapore and Malaysia are quite different from each other. I like both; it depends what sort of experience you are looking for. Singapore is rightly famous for its cleanliness. It is easy to travel via train and would be much easier with younger children. There will be far less "culture shock" involved in Singapore and, as such, it's a great introduction to Asia.
Malaysia is a wonderful country. As with Singapore, nearly everyone you meet will speak good English. It is very safe; I feel safer in Malaysia than I do in the US (although, like anywhere, don't be too flashy with jewelry, etc.) Muslims in most of the country are very liberal; only in the far north-eastern states are you likely to encounter a stricter atmosphere. Since there are significant numbers of Chinese and Indian Malaysians who are not Muslim, there is tolerance for all religions everywhere, however. Malaysia is also significantly cheaper than Singapore.
Realistically, any time you spend will be too short, but if you decide to do both countries, I would probably suggest a week in Singapore followed by a week in Penang. You can fly directly from one to the other with several airlines (Air Asia, Firefly, etc.). Penang is small enough that you can see a lot in a week and take in all three cultures (Malay, Chinese and Indian). Also August is the Georgetown Festival and has different events going on all month. I go back every August just for that!
As everyone else has said, it will be very hot and very humid so you will need to pace yourselves and drink gallons of water!
Let me know if you have any other questions.
