From everything I've scanned through, deliberate portraits take lots of practice. Though I think you're right that the light and post processing is harsh, I also think you're being hard on yourself. They aren't that bad. The focus in the top two look better than in your other example, the color and skin tone looks better in the bottom example. I'd agree with moving them away from the tree, but for a different reason. The ornaments are just in focus enough to be distracting. To my eye, it looks you've lightened the shadows or brightened overall a little too much, and the white balance for the lighting aside from the flash isn't completely corrected. Fixing both of those might help. As for the flash, how about shooting through a handkerchief? Haven't tried it myself, but I've read the tip often enough that it might be worth a try.

Take all of the above with a grain of salt, except for the part that you're being too hard on yourself.