My wife and I take the kids over to the beach for day trips every now and then, and that always involves dinner somewhere. Having small kids, we unfortunately have to avoid some of the fancier/sophisticated places.
Our favorite place in Rehoboth is Big Fish Grill, on Route 1 just south of the main entrance to Rehoboth, although Jake's Seafood (I've only been to the downtown one) is also good. Our first time at Big Fish was in 1999, before our first child was born, and the place was small. It has since expanded twice and they still have lines out the door most nights. Even on off-season weekends, the place is busy. Big Fish is a great place for kids, because it's noisy and you can draw on the table covering. The food is quite good -- I love the salmon -- and plentiful.
Just north of Bethany Beach is a wonderful place called Redfin. Now that our son is five and our daughter is really quiet at 4 months, we might give the place a go with kids. It, too, gets extremely crowded in season. Redfin is also on Route 1, and it looks out over the bay -- the dining room walls are basically windows, affording tremendous views of the sunset over the bay.
We don't day trip to Ocean City because it adds half an hour each way and not much is open off-season in Ocean City, but when we're in Ocean City we'll go down to Harrison's Harbor Watch at least once. The food is generally good -- seafood mainly -- but the best thing about it is the view of the boats coming through the inlet. Very kid friendly.
I haven't eaten at Phillips since I was a kid, so I can't say much about it. I think they're overpriced if you want crabs. Go to Higgins instead. Again, this comment is only for the steamed crabs that you sit and pick.
If you want sandwiches or more casual fare, head to Fish Tales at Bahia Marina (22nd Street). There's a sandfilled playground for kids and an interesting mix of sketchy people and preppy people. In other words, it's a microcosm of Ocean City itself.
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