Depending on how much running is going on in your backyard, cotoneaster is pretty tough and will spread quickly. I like using ornamental grasses as dogs can't break them, they just bend when a dog runs through them, like Blue Oat Grass. Lawn should be fine for a play area in the backyard too, as long as you're not operating a dog park! You could also use hog's fuel or sand for a play area. It really depends on how big of an area you are thinking and how active your dog(s) are.