When I do cupcake decorating with my kids, I just provide buttercream and a variety of sprinkles and lollies. It's fun for them to make faces with the lollies and use sprinkles for the hair. Or they like to just randomly throw things on. I think more goes in their mouths though then ends up on the faces but the love it! I've tried giving them tips to work with (they're only 1 - 3) but the icing goes everywhere - especially out of the top of the bag! So I just keep it simple - just put a plate with a big variety of things (you should be able to get those fancy sprinkles from the supermarket) and let them go mad!
I agree with melnick. I also stress to them to decorate their cupcakes as beautifully as they can...otherwise they are done in like 12 seconds 
I have also used mini cupcakes with success. (Often the teachers like the mini option too for their own waistlines.) Good luck! 
When I've done it in my kids' preschool, I gave them cupcakes that I had already iced in a variety of colors (they got to pick which color they wanted). Piping bags can be hard for little ones to use unless you have a good adult-child ratio (lots of grownups to help). If you want to let them ice their cupcakes, you can dallop just the right amount of bc into ziploc bags and cut the corner off, which should cut down on the mess and make it easier for them (I've done this at home with my kids and their friends). I divided up the different sprinkles and toppings into the sections of cupcake pans, which I placed at intervals along the tables. That way the kids would have a good selection within reach and wouldn't be running around trying to find different toppings. If you use m&m's, chocolate chips, marshmallows, or other candy, I would suggest that you give each child their own little portion (cupcake liners work nicely for this). Those are popular toppings and the kids may fight over them, plus you may end up having some kids that eat way too much candy unless you portion it out. Have fun!
Bec
When I've done it in my kids' preschool, I gave them cupcakes that I had already iced in a variety of colors (they got to pick which color they wanted). Piping bags can be hard for little ones to use unless you have a good adult-child ratio (lots of grownups to help). If you want to let them ice their cupcakes, you can dallop just the right amount of bc into ziploc bags and cut the corner off, which should cut down on the mess and make it easier for them (I've done this at home with my kids and their friends). I divided up the different sprinkles and toppings into the sections of cupcake pans, which I placed at intervals along the tables. That way the kids would have a good selection within reach and wouldn't be running around trying to find different toppings. If you use m&m's, chocolate chips, marshmallows, or other candy, I would suggest that you give each child their own little portion (cupcake liners work nicely for this). Those are popular toppings and the kids may fight over them, plus you may end up having some kids that eat way too much candy unless you portion it out. Have fun!
Bec
I think the kids would love the M&M's. You could even do shredded coconut! And the ziplock bag idea is great!!
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