My sons, ages 4, (almost) 6, and 8 play with a slightly simplified C&C/D&D system. I don't worry about attacks of opportunity, and the more complicated rules of combat. They tell me what they want to do and I apply the rules.
Like your kids, they all wanted something cool to start with, some sort of magic item. I explained that you usually don't get magic stuff when you are just starting out (made them start at 1st level), but they could each have something simple that they inherited from their adventuring parents. Also, the items will get more powerful as they adventure.
Ben, 4 year old, plays Spider, a human wizard. He got the most powerful magic item, but no one realizes is yet. He has a staff of "magic arrow" that fires unlimited magic bolts, requires touch attack. This way, he does not have to conserve spells. I will admit that his brothers and I give him a lot of guidance, but he rolls his own dice and has fun.
Jacob, soon to be 6, wanted to play Regdar. They enjoy the Scourge of Worlds DVD, which also gives kids a good idea of role playing since they have to make choices along the way. I said he could play a human fighter named after the famous Regdar. He wanted a flaming sword, so he got a longsword that can light up like a torch and deals +1 damage when flaming.
Joseph, 8 years old, plays Simton, a dwarf rogue. His item is called a "blink" ring, but for now it only grants one round of invisibility per fight. At first it was per day, but again I saw that kids hate to have to save cool stuff for later, they want to use it now. This gives him a chance to use his sneak attack at least once per fight.
Have fun, Hal. Gaming with my kids is a great experience, and I know you will enjoy it too.