Finally, don't get so caught up in taking care of your kids that you neglect your own retirement savings. One of my mutual fund holdings was significantly lower in value at the end of CY2000, yet I was hit with a large capital gains distribution. Lots of funds paid out big capital gains last year because they sold some of their tech stocks before the sector collapsed. So that doesn't necessarily mean your fund is a loser. But if your fund has a history of big distributions, it may be time to look for one that pays a little more attention to taxes.
Index funds are usually tax efficient, and some other funds are managed to reduce capital gains.
Those funds are often good choices for at taxable account. If you feel you were misled, or that the investment was not appropriate for you, I would call Fidelity and ask to talk with a supervisor. Explain your situation and follow up with a written complaint. They're paying a better return than short-term Treasury notes and bills. Plus, you don't have to pay federal taxes on the interest until you redeem your bonds.