If you are not a professional photographer, or don't need to use the photos you take professionally, and are only going to be shooting your kids, there is simply no justification for the extra $1000 between the two bodies. If the AF on the D7000 can't freeze your child, it's not like the D700 is going to be 1000x or should I say, $1000 better. Try focusing manually once in a while, as you'll be surprised how well you can do with moving kids, sometimes better than an AF can track their eyes.
As far as the ISO. It's a matter of just turning more lights on, or shooting your child in a better lit area. Those who need the high ISO and go for full frame cameras are generally those that have professional reasons why they have to be able to shoot in dull lighting.
You can get very large sized enlargements of your kids just using a DX sensor, so why not just stick with that and save the cash? You have to decide if it's worth that much more money of having the thrill of the better camera, or are you actually, really going to need that better camera?
