I'm not sure a 5 or 7 year old will even fit in a trailer. Mine were a bit big for their age but we ditched the trailer at around 4-5 in favor of the Trail-Gator.
What about getting the 7 year old a 24" wheel geared bike and having him ride solo, then pull the 5 YO in trailer with gear or the parade set up you mentioned for your gear.