Just to clarify, a 2-bedroom DVC unit sleeps 8. The 3-bedroom "Grand Villa" sleeps 12. When people say "villa" here I think "Grand Villa".
If you've never seen a 2-bedroom DVC unit I would seriously investigate it. You get a full kitchen, living room, balcony, king master bedroom with shower/whirlpool tub, 2nd bedroom with two queen beds and bathroom, and a pullout bed (which I believe is a full-size). These accommodations do not even compare to hotel rooms. As Disney calls it, they are your "home away from home."
DVC resorts include Old Key West and Saratoga Springs (Downtown Disney resorts), Boardwalk and Yach & Beach (Epcot), Wilderness Lodge and (soon) Bay Lake Tower (Magic Kingdom), and the Animal Kingdom Lodge.
To book from Disney they cost quite a bit (and as others have posted, it would be cheaper to go with the multiple value rooms). However, you can also rent DVC points from a member for a very reasonable fee. We've rented our points to friends before - obviously it's a bit tricky doing it with someone you don't know, but there are web sites out there that help guide you through the process. In any event, it's worth investigating. If you can somehow manage to get in one of these units, you will be very happy you did.