Hello there Beth!
You have a really good problem on your hands, because they are both so much fun! The Pirates and Pals Cruise is definitely more intimate since you are confined to a ship. The Pirates do interact with the "crew" and make you feel right at home. I have heard lots of stories from Moms Panelists going on the cruise and having a wonderful time! So you can't go wrong if you choose that.
I myself though, would pick Mickey's Very Merry Christmas Party over the cruise. First, it lasts from four until midnight (tickets say seven but you may enter the park at four). There is also a special Christmas parade, Holiday Wishes fireworks, and other shows as listed below:
Mickey's Once Upon A Christmastime Parade
Celebrate The Season Show
A Totally Tomorrowland Christmas Show
Special Meet and greets with Disney Characters
Character Dance Parties
Holiday Wishes Fireworks
So, you will basically get more bang for your buck if you go to the party. The crowds are not as busy as when the regular park is open because they limit the number of guests at each party! Your kids will love the Snow falling on Main Street USA and who doesn't love free Hot Chocolate? I hope this information helps you with your planning and if you have more questions, please ask away, we are always here to help! Have a Magical Time at the Walt Disney World Resort! Thanks so much for asking the Moms Panel!