Hey,
I haven't been to Phuket with kids, but I've been to Katathani Resort - It was simply divine !!!
It's right on the beach, has a kiddie pool and slide/kids club, It's a good 20 mins or so away from the main centre (a good thing with kids!!) yet has restaurants and shops locally. I'm pretty sure breakfast in included and it's definitely cheaper that $600 (Keep an eye out on web specials)
Check it out at http://www.katathani.com/index.html
(and have a fabulous trip!!!)