Mentioning reset switches made me think of using a livecd approach, where you decompress to RAM and everything is nuked on reset. This is very likely going to be worth the effort to set up: if the kids get stuck, they can press a magic button to fix it on their own. This will encourage them to be more adventurous.
(Obviously you need to mount somewhere volatile to actually save things to, unless you want to use NFS or something. Then there's the problem of every program losing settings because it's impossible to filter the dotfiles and .config in the home dir for "this will cause problems" on shutdown, and only keep the bug-free stuff... not sure how to fix that.)
I know there's a painting program for Linux oriented towards kids, but I can't remember it right now. If noone else mentions it I'll go find it.
But... given the master-reset capability, would it be overly insane to put Inkscape and the GIMP on the machine? No, neither program has a naively discoverable UI, so there will be a learning curve, discouragement and friction, but learning that there are horrible UIs out there early could be interesting...
Another thought is that if you're from the 80s/90s, dump a bunch of emulators on the thing. MAME and DOSBox will probably run interestingly on a low-powered ARM processor, but it may turn out that performance is acceptable. That'll give you a position of confidence to work with, which will likely help a lot.
Finally, I recommend installing both Scratch and Jupyter. Scratch is aimed at kids; I find it utterly confusing myself, but then I started with QBasic and no manual, not block-based programming, so that's probably why. Jupyter is Python on steroids; the visualness and immediacy of it is likely to be very helpful. (The QConsole version is likely to be faster than HTML notebooks.)