Rüdesheim is a gorgeous medieval town dating back to 1074. The local wines are superb, the quaint streets are charming, and there are an incredible number of great cafés and restaurants in a town that has largely been spared the ravages of war.
Here is the town's official website:
And here is what TripAdvisor has to say:
Finally, here is the Wikipedia page about Rüdesheim:
Naturally, Siegfried's Mechanishes Musikkabinett should be first on your list of places to visit (www.smmk.de). Moreover, just around the corner from the market, at Am Rottland 6, a new museum of automatons has just opened in the former Asbach distillery, Mechanicum (www.mechanicum-asbachgasse.de). And there are lots of other things to do including several interesting monuments and castles nearby.
The Marktburg Castle, in the center of town is particularly well preserved. And if you are in a car, do visit the Niederwald Monument and some of the interesting ruins nearby. There are a number of wineries you can visit, too.
Rüdesheim has some wonderful shops but if your family is really interested in shopping while you are at the fair, the much larger city of Wiesbaden is only 20km away. Here, they will find some really marvelous boutique shops - as well as the world's largest cuckoo clock!