The ending had to be reality because there is no alternative, because Mal isn't there. This means she really did commit suicide, because if she had just gone up to a higher level of the dream, or broken out into reality, then she would've likely gone back in to retrieve him, or someone else would have gone in to do so. If he was trapped in the layered dream created for the Fischer job however, one of his team mates would've gone in to retrieve him like they did for Seito.
As for why the children don't look that old, it is because not that much time has passed between when Cobb's wife had died and the current time. When they showed the team prepping for the Fischer job, it looks as if they do most of their planning/training for a potential job inside of a dream, to take advantage of the accelerated timeframe in there. I'd assume that they used the same methodology for any of their other past jobs, so while they may act like they've known each other for years, and spent a lot of time on the job together, it might only be a year or two since Mal's death in reality.
