I grew up in Indiana and visit there at least once a year. ITA with everything everyone else mentioned.
Love Spring Mills! The settler village alone makes it worth the trip, IMO. Be sure to take home a bag of their stone ground cornmeal. Yum!
Brown County is gorgeous, although I prefer it in the fall when the leaves are changing. Lots of neat little shops and unique things to the state.
Highly recommend Holiday World & Splashin' Safari. The value is unbelievable. You get a world class water park and an amusement park all for like $40! Not to mention they offer free parking, sunscreen and sodas all day long. Food is very cheap there, especially when compared to Disney. Your kids will love it. If you can do 2 days, I'd almost recommend it. My kids never want to leave Splashin' Safari.
The Children's Museum in Indy is excellent too, and fairly cheap. You can spend a good chunk of a day there. Of course, if you get out early, there is tons of other things to do around Indy. It's your typical large city, so you won't have any issues there.
My favorite city in all of Indiana is Bloomington. I love it there. Indiana University campus is unlike any other I've been too. It's gorgeous. Monroe Reservoir is there, and you can rent pontoon boats and spend the day out on the water. If you get a chance to go out without the kids here, check out Oliver Winery if you like wine.
