You can dine with Lilo & Stitch at the PCH Grill, they have a character breakfast:
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Also, YES, Ariel's Grotto is awesome! Ariel will be there and I must say that of all the Princesses I've seen in my Disney days the ones at Ariel's Grotto are the most beautiful & gracious. Your girls will NOT be dissapointed going there, the restaurant itself is adorable too.
Oh, and just so you know, for the majority of restaurants in Disneyland you can only make the PSs two months in advance. The dining line # is 714-781-DINE.