Jakob Nielsen's Alertbox discusses Website Usability for Children. This article turns up some interesting points; including the fact that kids don't have an innate mastery of technology; and they can't differentiate between content and ads. Adults have become so used to ignoring banners they don't think to educate their kids about them - the kids just see more bright, animated content. Contrary to popular opinion, kids do not have a magical ability to understand and operate all things technical - a bad website will confuse them even more than it confuses adults. On top of this, kids bore even more easily than adults; if a site is hard to use then kids are gone. They know there are hundreds more pages where that one came from; so why are they going to keep using the crappy one? An interesting read all 'round.
There is further discussion on NBC news, which features an interview with Jakob Neilsen. Surprisingly, Neilsen doesn't suggest that sites should be dumbed down; just that parents need to educate their kids about the web, while designers should make their navigation systems clear and simple (which is not the same as dumb).