Hi and thanks.
Thank you for the advice. So basically when i fill the form in online (Vaf4a) then i select the 'child or other dependent of settled person option'?
Yes, that's right (although, technically it should be your wife filling out the application, not you, because she is the visa applicant and is applying on behalf of her children)

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Do i also need a Sponsorship Undertaking Form (SU07) form?
No, I don't believe you do, at least, not if you are applying in the US... you just need to fill out the online application and provide a letter of support for their applications (see the last two posts of this thread:
http://talk.uk-yankee.com/index.php?topic=66089.msg927268#msg927268).
Once i do this online then it asks all the same information as my wife to be's application. Things like marital status, job etc. What do i do about this?
I don't know for sure, as I've never seen the actual online application (I can't get past the first couple of pages because I am not a visa applicant and don't have the information to fill in), but I would guess that instead of marital status and job, it would have a section for information about the child/dependent.
If you look at the VAF4A paper application, it says that section 8.4 should only be filled out if you are applying as a fiance/spouse/partner and 8.5 should only be filled out if you are applying as a dependent (not a spouse). I would guess that the online applications will be adjusted accordingly, so that only the relevant questions are displayed for each application.
You can always do a run-through of the online applications before you actually apply, to see what questions are on it - just don't submit it yet (the application can be saved for up to 7 days... and each time you log on, you can re-save it for another 7 days, but it will be lost if you don't log on for more than a week).