All excellent advice above. I second stopping to visit Lee Spencer on Steamboat Creek. Lee is an amzing person and his knowledge about steelhead is second to none.
As mentioned above, to fish the most productive parts of the Deschutes (for steelhead) that time of year, will be a long haul from Bend (1-1/2 - 2 hours each way). In Bend, you are going to have tons of flyfishing opportunties for the kids within a one hour drive. You can head up to the high lakes on Century Drive, hit the upper Deschutes, Little Deschhutes, Fall River, and also hit the Crooked River which is a great river for beginners (note: the Crooked runs through the the desert so it may be very hot that time of year). I would also highly recommend at least one night or morning on the Metolius. It is a spring creek and very difficult to fish, but it is a river of jaw dropping beauty. I have fished all over the West, and to me the Metolious epitomizes the perfect trout stream. However, being a spring creek, the fishing can be very difficult and skunkings are common. It is located in a paradise of ponderosa pines and there is lots of hiking and exploring to do in the area for any non-fishers in the familly.
If you happen to swing through Portland, shoot me an e-mail. There are already summer steelhead in some of the rivers surrounding Portland.
As you probably know, August can be a tough month for fishing anywhere, but I think you will have a wonderful experience in Oregon that time of year. The diversity of the geography and fishing is amazing.