My family always complains that I don't have a light "dim enough" for their kids to play with.
I think the 2AA Garrity Tufflite (The one that says "Feel me!" on the package) with a PR LED is a good idea. By the way, the NiteIze PR bulb is dimmer than the SMJLED and readily available at Walmart. Maybe a little something on the inside of the lense to diffuse the light as well.
Also, someone posted a thread recently about small LED lights in Kellogg cereals. I have two of them, and they are about as dim as it gets. You have to turn off all the lights and let your eyes adjust, and you can still barely see the beam. They probably require more dexterity than a 1.5/2.5 YO can muster though.