Hello there,
Personally I am biased to train travel. Shinkansen travel in Japan is so amazing, its fast, convenient and easy. With the JR Pass you don't have to worry about budget (outside of the one time purchase) and its an experience that you can't find easily elsewhere. That said, it is quite a trip from Osaka - Hokkaido, especially if you want to go up to Sapporo or even more north. Going from Osaka - Hakodate could be okay to do on a single day. You could then stay there a night before travelling on to Sapporo. I do think flying would be the better option if you just want to visit Sapporo.
It may also depend on your family, for instance the Shinkansen trains from Tokyo - Hokkaido are the fastest in Japan and for some kids this may be super cool.
Those are my thoughts, I hope they help in planning your trip.
Daniel