Awan-Legal : hi
Awan-Legal : You can certainly apply for your younger son to be registered as a British citizen on form MN1
Awan-Legal : He will meet the requirements as he was born in the UK and you have now settled in the UK (with indefinite leave to remain).
Awan-Legal : Your other son may also apply and is likely to get this although this will be outside the requirements since he was born abroad. He is likely to be granted this on discretion though as there is good reason to since the whole family shall be applying for British nationality (if not at the same time, in due course).
Awan-Legal : If you apply for one child alone it will cost £540 but if you submit the applications at the same time for two children, then it will cost £810.
Awan-Legal : They will still need two separate application forms though.
Awan-Legal : Your children can apply for registration as above at any time since you have Indefinite leave. You and your wife, however, will need to wait until August 2012 before you can apply for naturalisation. The fee is £836 individually for each of you but as husband and wife you can both apply together (again on separate application forms) for a joint fee of £1294. This will be on form AN new.
Awan-Legal : I hope that answers your question. Please click accept on my answer and I will also provide you the links for the application forms and further requirements.