Hi Shane,
Well the truth is that what you have heard is right..but, and I emphasise the BUT here, to a degree.
Jakareta is no more unsafe than any major city in the world and for that matter any major city in Asia, for example, I would not put Jakarta any higher up the list than Delhi. It is true the water is not good enough to drink but then again having lived in London and New York I can tell you that the water is not okay to drink in those two places also!!
Everyone drinks mineral water and all appartments have a dispenser do dispense both hot and cold mineral water from 1 gallon bottles so it's not a problem at all.
On the whole, having lived in Jakarta for approx. 1 year with my family I can say that it a nice and welcoming city to live and work in.
If you are after community then the Indian community here in Jakarta is of a big size and the schools here are also fantastic, although on the pricey side, however if your company is paying as mine are this is negated from the issue. (Ghandi International has an excellent curriculum and the teachers are of a very high standard in mu opinion a higher standard than in India!)
In regards to places to stay, the Indian community is very large in Taman Rasuna and many Indian families live there, so plenty of friends for your wife to make and also your children, it is a complety safe complex with security 24hrs and excellent facilities. IT is on the cheaper side of the price range, granted, but the appartments are quite big and the upside here is the family and community side of things. Price range around 800-1500 USD per month.
You can also consider Mega Kunnighan to live in which also has a largeish Indian community, and is also where my family and I reside, it is more expensive than the "average" with apartments of a family size going for about 2500-4500 USD per month, although you can find cheaper but with a family of your size I would think that you need a slighlty bigger place.
If you are after a house or condo then Pondok Indah or Kemang would be the preferred location, the only issue I would think of with this is where you are working as the traffic into work if you work in the business district would take you around 2 hours to negotiate in the mornings.
There are many Indian and Western Restaurants available of great quality in Jakarta and the standard of living is very high, the people are friendly and courteous as well and since living here I can report I have had no trouble whatsoever and even not had a sniff of trouble at all, which is not the case for my home town of Delhi!!
I would reccomend that you come to Jakarta, I was aprehensive just like you but since being here, I can say I have enjoyed it immensly and the kids and wife like it too!! With a 3 year contract here it's a good job!
If you want to ask more specific questions then feel free to ask, I or someone else would be more than happy to answer them for you!!
Regards,
Waz.