Not all that bad!
Went August 7 - 14 last year with a 1.5 and 3.5 year old. I have been to Floriday in August/September about 10 times to play softball tournaments. The heat was bad for that, but last summer, it was unlike anything that I have ever felt. I mean sweat pouring off me at 8am in the morning in the shade.
To combat the heat, here is a foolproof plan. Take advantage of early morning hours and retreat to the pool/hotel after about 3 hours in the park. Utilize fastpass as follows. Get a fastpass, ride some other rides, and then get fastpasses for another ride at the earliest moment (its on the bottom of your fastpass ticket), and before using your first fastpasses. Repeat the process over and over again. After 3-4 hours of rest in the pool/hotel, come back to the parks by about 4pm. This time, pick a park that has neither an early or late extra magic. That's when the early risers start crapping out for the day. In addition, most (but not all) of the afternoon thunderstorms are done by 4pm.
As for the crowds, I have seen better and I have seen worse. This year, I don't have a clue on what to expect. Last year was buy 4 get 3 free, this year free dining. I have had this vacation booked long before free dining. Just out of curiosity, I went to disneyworld.com and tried to see if I could get a reservation from Aug 16-23 (when we'll be there) and most of the values were showing very limited availability. Some, like POP and All-star Movies showed no availability.
Oh yeah, and going back, this time with a 2.5 and 4.5 year old. Can't wait! And for those of you out there that say, he's nuts, or their too young. For my money (and discounted money at that), I am willing to pay to see the smiles of two youngsters who find grown men inside costumes as real life things. In addition, they are extremely well-behaved, and my 4.5 year old son still has vivid memories of his trip last year. What's better than that.
Oh, and by the way, I am nuts!