It sounds like there were two problems in the session:
1) Bad DM/player communication. Blame can probably be evenly assigned here. As a player I hate it when DMs tell me how to play my characters and as a DM I hate it when players totally ignore me.
2) Bringing current, real-world ethics and ideas into the game, mostly on the part of the Barbarian and Wizard players. This draws upon some of the earlier comments in this thread. If this game is generally based on the cosmology of Medieval society, then the very idea of childhood changes significantly. The social historian Phillipe Arrease said, "The invention of childhood is something that each society does for itself." The key word there is invention. People in early modern Europe didn't have the same idea of childhood we do, it's actually a fairly new thing (c. 17th century). The "innocent child" that we think of today is a Victorian notion, some go so far as to credit the idea to Dickens. Adolescence is even newer--for most of history, people in that age category were treated as smaller adults.
Now, it's fair to say I bring more history into my campaigns than most, so most of this might be moot. But, given the framework of the campaign, I think the Paladin's player was within his rights. They were no longer children (even if people think of them as such). The number of axes (pl. of axis, not some dwarven thing) Medieval-era people used to construct their world were fewer than we do today. Good/Evil really came down to God/Satan, which actually fits better in a DnD game it seems.