Can we break our lease and get our deposit back if our well water is contaminated and has been making our family ill for 2 months?

In every lease there is an implied warranty of habitability which requires the landlord to maintain the premises in a habitable condition by complying with state and local housing codes.  The contaminated well water is a health and safety issue which constitutes a breach of the implied warranty of habitability.  When there is a breach of the implied warranty of habitability, the tenant notifies the landlord and the landlord is required to respond within a reasonable time by making the necessary repairs.  When the landlord fails to respond within a reasonable time, the tenant has the following options:  The tenant can make the repairs and deduct the cost from the rent (this is not feasible in your situation) or the tenant can move out and terminate the obligation to pay rent for the balance of the term of the lease or if the tenant stays on the premises, the tenant can withhold rent and defend against eviction.  Another alternative is to sue the landlord for breach of the implied warranty of habitability.  You can also contact the local housing code inspector,who can bring an enforcement action against the landlord for housing code violations.  As for return of your security deposit, the landlord should only be allowed to retain that portion of the security deposit for cleaning  of your rental.  The landlord should not retain anything beyond that of your security deposit.  The landlord will probably challenge this and if so, you will need to litigate the issue regarding the return of your security deposit.

A separate issue in this case is the personal injury claim or claims of your family members who have become ill from the contaminated water.  When they complete their medical treatment and are released by the doctor, obtain their medical bills, medical reports and documentation of any wage loss.  Each family member has a separate claim.  The children would obviously not have a wage loss claim.  Compensation for the medical bills is straight reimbursement.  The medical reports will document the nature and extent of the injury and will be used to determine compensation for pain and suffering which is an amount in addition to the medical bills.  Compensation for wage loss is straight reimbursement.  If the claims are settled with the landlord's insurance carrier, NO lawsuit is filed.  If some, but not all of the personal injury claims are settled with the landlord's insurance carrier, only the unsettled claims would pursue a lawsuit for negligence against the landlord.  If you are dissatisfied with settlement offers from the insurance carrier, reject the settlement offers and file the lawsuit for negligence against the landlord.  If the case is NOT settled, the lawsuit for negligence against the landlord must be filed prior to the expiration of the applicable statute of limitations or the claimants' rights in the matter will be lost forever. 

As mentioned above, if you sue the landlord for breach of the implied warranty of habitability, the negligence claim(s) could be included as separate causes of action (claims) in the same lawsuit.  You will need to be appointed guardian ad litem to file a lawsuit on behalf of your minor children because minors cannot file a lawsuit themselves.