Your new plan seems just right. Three days really isnt that long to do everything on oahu. Your new itinerary is just right for some relaxing and sightseeing.

Just a suggestion. After Hanauma Bay, continue east. You can check out the blowhole(A lavatube that shoots water in the air) Then Sandy Beach. The kids will love seeing sandys. Dont let them swim here before talking to the lifeguards. The best bodysurfing/boogie boarding on oahu.(But also real dangerous) Then drive around Makapuu(Another famous body surfing beach with awesome scenery) COntinue past waimanalo and Kailua, then come up Pali highway and stop at the Nuuanu pali lookout. This place is famous for a famous battle in old hawaii and offers awesome views of the windward side. The kids will love the strong winds here. People like to use jackets and lean into the wind, fun stuff. From here its just a short drive back to waikiki.

I can't understand why everyone is telling you there is such a long wait at Dukes!! If you know you want to go there ahead of time- call and make reservations (at least 1-2 weeks ahead of time). This is what we did and while others sat and waited, my husband and I were escorted to our table right next to the railing overlooking Waikiki Beach. Reservations mean you don't have as long a wait just like any other restaurant in any other city.
We also got up early, arrived at Diamond Head by 6:45 and were finished by 8 pm (it's not that strenuous or long) - drove around to Hananuma Bay and got the last parking space and spent the morning there - it is worth it, especially if you have kids. If you have time to drive the north shore there is a "shrimp shack" where they raise their own shrimp and langostinos - it's worth stopping there for a dozen prepared in their various ways. Enjoy

A girlfriend of ours is one of the many people paralyzed from sandys- she was just 18. I would never take young kids there to get into the water because they just don't have the skill in the situation of the water breaking right into the sand.