Deuce, you'll be hard pressed to find a bigger advocate for kids and trains on this forum than me. So since you asked....
Build the layout for YOUR SON (s) first. In the long history of this hobby, father's bought trains and then built a layout for their boys. Today, it seems to have reversed and we have father's building train layouts for themselves and then trying to get their boys involved.
5x8 or 5x9 is just fine. Most people in the hobby do not have basement sized layouts. You're young with young boys. What if you have to change jobs and move? Might be a good idea to design something that is movable.
Affordable and durable does not equal SCALE. For over 100 years, Lionel meant "not to scale." Now, because of the newer scale proportioned trains, there's a new term: semi-scale (or traditional). But these are the kinds of trains you'll pretty much want to look for. And for a variety of reasons, prices of used traditional trains are for the most part, attractive. Though depending on your free time, you might want to avoid trains that are not guaranteed to work. The older trains are all fixable, but it takes time and the know-how.
Kids like the operating cars and accessories. There are simple ones, like the giraffe car (where the giraffe ducks his head automatically via a track trip), the animated aquarium cars (again, operating via either track power, or the less costly ones, by movement of the train, or the operating barrel car.
Kids also like to see how fast the trains will run, so you might want to have the track away from the very edge of the layout, or build the layout board closer to the floor, having plush carpeting on the floor.
Forget the replica of the juice train. First and foremost, the hobby is for your boys and yourself to enjoy together. To my knowledge, there is no traditionally sized CSX juice train, though there are scale versions, which are going to be more detailed (easier to kids to break) and MORE costly.
That's not to say you can't mimic CSX trains. Lionel has recently made a LionChief CSX set and makes some LionChief Plus CSX locomotives. BUT remember your budget. All the newer trains with any sort of digital control and features, will as a rule, cost you more money.
You might want to consider as an early purchase, a separate transformer if you don't have one. Your Pennsylvania Flyer set likely came with the wall wart, unless it was an older set. The postwar Lionel 1033 is a superb one for a layout with young kids, but find one that has been serviced. With two potential settings of voltage to the track, it allows you to limit how fast kids can run the trains.
And the reason I mention a transformer, is then you can look for any multitude of locomotives made prior to the advent of the digital control systems. These locomotives generally do not have the sound packages, but are reliable and are more affordable. Lionel and K-Line (now out of business) both have made CSX engines that are affordable. Some of the early made MTH Railking and Rugged Rails trains have engines and rolling stock in CSX.
I run starter set stuff personally. Some of these trains get a bad rap on this forum, along with Lionel products from the MPC era. In almost 30 years, I have never had one defect, or a DOA out of the box. That said, I also take care of my trains. And everything still works to this day. I've had to replace one smoke unit out of a Lionel starter set 4-4-2 (the oldest one I have), I've had one DC motor go bad, and had one circuit board fail after a year or so, and that was an RMT (Ready Made Trains) Rail Diesel Car... but I got it for such a deal, I can't complain. I fixed it with an extra circuit board I had.
A good rule for starter sets: NEVER put an engine with plastic gears directly on carpeting, or on a dirty basement floor either. Lubricated gears can pick up stuff, and then you have an engine that doesn't work. Can happen with metal gears too.
Don't be in a hurry... take your time. Folks get into the hobby and move too fast without thinking ahead and figuring out what they can afford versus what they want. Besides, unless you're rich, you WON'T be able to do it all at once.
And don't be discouraged about all the 'scale' talk. Lionel trains have always been toys. And YOUNG boys want to play with toys. You wouldn't be pleased if your young boys broke some expensive engine or train car. It might even make them feel bad and discourage them from liking the hobby. Also you'll read a lot of talk here about trains not being accurate enough, or prototypical. That's fine for those guys, but your boys will likely not notice the CSX logo on a caboose style never owned by the CSX.
The new scale trains being made with all their realism and features are AMAZING, no doubt about it. They are also more costly and far more prone to having parts not being available any more, versus many of the traditional trains which sold in multiples ten of thousands, had lengthy production runs MEANING parts are easier to find.
There are ways to do this hobby on a budget! I know because I DO. But it means I have to adjust what I like and can run on my layout. But it's no big loss... I hear all the sounds in my imagination, and the trains look just as real.... without having spent all the money.
BUT ultimately, it's up to you. The main thing is to run the trains for fun, not frustration.