Any places you would suggest traveling in China for October holiday? We have young kids, so aren't looking for a place that is extremely crowded - is that possible?

it'll pretty much be crowded in most touristy places. Might be better if you can have a vacation outside of China, but avoid Thailand and Hong Kong.

We are thinking about Vietnam though having trouble finding a tour agency. Any recommendation?

It will be very crowded anywhere, its a Holiday. This is China.

Not everywhere will be crowded. I deliberately chose to go to Mianyang and Chendgdu in Sichuan province, deliberately avoiding Jiu Zai Gao (spelling?) which is a very obvious tourist destination. Mianyang was exteremly quiet and a pleasure to walk around. Chengdu wasn't busy either although being a bigger city, was less enjoyable.

Just avoid the obvious destinations like Beijing / Great Wall etc. Oh and of possible stagger the journey dates (like avoid the 1st day and last day to fly in and out). It may not be that bad.

Jiuzhaigou is very touristy but it really is stunningly gorgeous. The main problem here is that the Golden Week holidays guarantee that most good places will have tons of people and you'll be mashed with tons of people getting to and from there. That's just the way it is and I reckon you don't have the option to take your vacation on a different week. Right?

The other major problem is that while the smaller back-country type of places may be less crowded (AFTER you get there), they're also less likely to have the accomodations or conveniences you may want for or with your children. Traveling with kids may limit your options depending on what they're like. Perhaps instead of going to see the sights where everyone will be, consider coming up with unique activities or experiences for your family to enjoy together that don't require moshing with other tourists.