Listen to Tom...

Only thing I would add is stay with the light air until they are ready for medium. Before going out in more breeze, you want them to be totally familiar with the boat, the correct terms for the basic boat parts (you can teach that on the beach, at home, etc.), so you can communicate with them if there is an issue on the water. Make it fun, and use sailing as the reward.

Once they get into it, the racing is key, even just fleet races. It gives them something to focus on, other than being afraid, etc. Even better would be if there are more kids on the other boats, they can "debrief" with their friends later.

As for safety gear, I agree 100% with the PFDs at all times. I would also have a throwable PFD, with a line tied to the boat, and easy to access.

With kids, you really only have two enemies: boredom and fear. Keep it fun and safe, the rest will take care of itself.

Mike