I found this article thanks to Digg.com, and I came across an interesting distribution that is geared for children. It's called Qimo and it's based on Ubuntu. I might give this a try on the kids' PC which has been running Ubuntu 8.10 for a while now. Seems to have a kid-friendly interface as well.
PS: Their FAQ explains a lot about the distribution, as well as why they're hosting the site on Windows-based servers (I had wondered that myself when I saw the .aspx suffix ).