Not looked at it myself, but I thought I'd mention [Kodu][1]. What works for you will depend a lot on age and how keen they are.

Way back when I was a kid we had the [Shoot'Em-Up Construction Kit][2]. :)


  [1]: http://fuse.microsoft.com/project/kodu.aspx
  [2]: http://en.wikipedia.org/wiki/Shoot'Em-Up_Construction_Kit