As usual, the CPF crew give great advice.
Those new Cree lights look pretty sweet...I haven't tried any, though.
If you have a couple of Minimags laying around, I suggest the Nite-Ize 1W drop-in with their IQ switch. It is about $20 total, and comes with a reflector.
It is pretty darn bright (25 or 30 lumens?), very nice beam for walking, has multiple light levels (including slow and fast flash), and the L/M/H levels are on a 15 minute timer (auto turn-off). There is also a cool flashing red "find me" LED in the tailcap.
You can use rechargeable AA's, alkies, lithiums...whatever.
I think kids would think it is cool, overall.
For my niece I have used blue lok-tite for the head, to prevent mis-adjustment of the beam.
For less money, you could use the drop-in alone, which I believe was $12.