I live in Brooklyn and work in Manhattan so I know the area quite well. You definitely need to visit the Toys 'R' Us in Times Square, simply because it's immense and there's so much fun stuff in there. There's a ferris wheel inside, giant T-Rex, etc.
FAO Schwartz is another popular choice, but you need serious dough to buy anything there. I once had a picnic in Central Park and dropped $15 on an ordinary frisbee there.
In terms of hard to find merchandise, that's a crap shoot. There are so many stores in the area it's ridiculous.