First things first you need to get a OS disc with the windows ID key for kids put win98se on, if you can get a disc. You may get one on hear from some one who as upgraded to XP and does not need the 98 disc
Then why not download a Linux distro, that contains all they will need including games. But you need a CDRW to create the boot CD's click here at the bottom it's free and easy to setup. If you decide then I can give you direction on install.