First, when properly completed there is never a 1 person household because the sponsor is also counted. Always use an Adobe product to complete any USCIS form.
Your children are not derivatives but, my advise is not to use the EZ version. It's always ok to use the full version.
If you want to have the household size properly computed on the form, the count the two children as Other Dependents, on the wife's form, then count the wife on each child on each child's form, and the other child as 1 other dependent on each child's form. That way, all forms will show a total household of 4.