Varenna
Varenna is a charming town, centrally located on the eastern edge of the lake. It's an easy day trip from Milan by train, or spend a couple of nights enjoying this area.
Vezio Castle (Castello di Vezio) - Vezio Castle sits on a promontory, high above Varenna, with fabulous views of the lake. There's been a settlement on this site since the 2nd century AD; in the Middle Ages the castle was a watchtower and military outpost. Today it's a beautifully restored five-sided castle with crenellated walls, a tall keep in the middle, ghosts and rusted armor draped in stone niches here and there. Cross the wooden bridge and climb up the tower of the castle keep, and don't miss the underground tunnel.
In the afternoons are falconry shows, where hawks and owls fly free. (The castle is also a care and training center for birds of prey.) It's fun for kids to see these magnificent birds, wings spread wide, flying overhead.
The castle has picnic tables, a snack bar, and restrooms, and is open daily, end of March to beginning of November, weekends in winter, weather permitting.
Tip: To get to castle, you can drive to the town of Vezio and park, but the best experience is to walk up. In town, right next to the Hotel Montecodeno, take the narrow stairway. Walk up the street until it turns into a cobblestone path, leading up the hill. Follow the signs for "Castello di Vezio" through the shady forest and then the streets of the ancient town of Vezio, until you reach the castle.
Lakeside promenade - Walk from the Lido and ferry landing to the old town. The walkway, ornamented with flowers and trees, goes right above the lake, and around a little harbor. Continue walking through winding lanes to the wide piazza, with a large bell tower (at noon, the bells ring out). Varenna is largely pedestrian, and the walkway is okay for strollers.
Lake fun -
Boat cruises - Kids will want to get out on the lake. A nice boat ride is to take the ferry that goes to Mennagio, then go down to Bellagio, and back to Varenna. This loop has lovely views of the towns and mountains around the lake.
Next to the ferry landing is a colorful playground with climbing structures and toddler swings.
Rent boats - Rent motor boats or row boats, and explore the lake on your own.
Lido - The Lido has beach access, with beach chairs, umbrellas, a snack bar, small play area. Older kids can swim off the dock area; little kids can play in the shallow water, and watch the ducks and swans on the lake.
Hike to a "mystery river" - It's a short walk through the woods to Sorgente del Fiumelatte ("river of milk"). Fiumelatte is a short river that springs forth from a grotto in the mountainside, and cascades down into the lake. Each year the river only flows from the end of March to the end of October. Leonardo da Vinci tried to explain the mystery, but to this day, but no one knows why this river regularly stops flowing in the fall, and starts up again in spring.
To pick up the trail to Fiumelatte, across from the Villa Monastero, walk up the little road that branches off and goes up the hill (the road has no sidewalks, so watch for cars which may come by). At the cemetery, follow the yellow sign for "Sorgente del Fiumelatte," following the trail through the shady forest (there are other unmarked trails going off to the left; don't bother with those). Keep on the trail until you hear sounds of water in the distance - this is the river springing from its source in the mountain.
At the river are picnic tables and views of the lake, so bring your lunch.