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>The only way to unlock the account is to provide a phone number in order to receive a confirmation code.

You can use any phone number you have access to. It doesn't need to be a unique phone number for each child.

And Microsoft could send the confirmation code to the email address already associated with the account, but they would rather create a reason to siphon more data from people.

Has anyone come up with a disposable mobile number service, similar to how you can get a temporary email address for signing up to junk?

They exist, but this is likely a very bad idea. Most services that I've found, once you use a mobile number with them they never really remove it and the next thing you know, they are sending some stranger SMS messages to change your password per their "secure" 2FA requirements.

I can confirm this is a bad idea. Many many services permanently use it as some kind of fall back recovery, even after the phone number is removed and recycled and no other one is added.

MS blocks most of the disposable number services.

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