Agree with the everything above especially Vassilis - try both!
The diving in Sharm is, in my opinion, much better than Dahab. Both locations can easily cater for non-diving partners and kids but as Vassilis also said, a boat trip to Ras Mohamed, for example, would mean being away from the hotel for 10 hours or more. Non diving partners and kids are usually welcome, but it can be a long day out at sea and it can often get quite "lumpy" - not ideal for all families.
The big hotels and resorts in Sharm will cater for younger children with babysitting facilities, kids clubs and animation teams keeping the kids busy while mum and dad sip margheritas in the bar, and you will find plenty of entertainment without having to stray too far from your hotel (or even leave it!), but yeah, Dahab is a place where if you stray too far from your hotel, you will fall in the sea, and the atmosphere is much more chilled and relaxed.
You'll find organised excursions such as camel safaris, quad bike riding, snorkel trips, visits to Cairo, Luxor or wherever in both locations, but I usually recommend the trips arranged through the hotels, especially if you are in Sharm, because yes, although it's all very touristy, it's usually well organised and safe, with no hidden extras!
And as tippytoes said - a lot will depend on what exactly you and your family are looking for.
Ask away!
Cheers,
C.