I've been to both parks many times. For kids that young, I would stick with Sesame Place. Everything is geared toward very young children there, so they can participate in nearly everything. I think it's a great place for little kids, and my own kids have never been bored with repeat trips there.
There are things for younger kids at Hershey, but it's definitely geared more toward older children and adults. I remember going there once when I was 13, my brother was 9, and my sisters were 6. My brother and I had a blast - my sisters were miserable. They just couldn't do much. However, there is a zoo at Hersheypark, and also a very fun waterpark. So you might be able to find a way to keep the kids happy there.
Some people have mentioned Dutch Wonderland, and it's a pretty good option as well. Just a fun amusement park, with plenty of things for younger kids. It tends to be less crowded, and is a good bit cheaper than either Sesame or Hershey. If I had to pick only one, I don't think it would be Dutch Wonderland. I like all the magic of the other parks, but it is still a good choice.