Camping is definitely a good option but usually try and get one cottage holiday in a year as well – we have had cracking holidays in Dumfries and Galloway – loads of farm parks etc and Stanes for riding.
Also recommend Northumberland – awesome beaches, quite a few farm park/kiddy friendly places around, some just over the border. Great for castles for older kids.
The Tywyn (sp?) area of Wales was also good – farms, animals, steam railways, beaches, the alternative energy centre when they get to school age, mountain biking near by.
We've found holiday cottages on farms are great – the farms provide immediate entertainment, especially at lambing time, some deliberately set out to offer the experience. My eldest in now 6 and a half, and in the last couple of years has seen lambs born, bottlefed them, and driven a tractor. He's also seen dead lambs and sheep, which hasn't fazed him, and given him quite a mature view of farms and food production. (He gets a bit spooked if the "dead" animal is still twitching though)