For my kids I have stuck with the PS2.
Most titles are budget priced now.
All the Lego titles are good.
Lego Batman is my personal favourite and I thought Lego Indiana was the weakest. Lego Star Wars Original Trilogy is the hardest.
Incredibles:Rise of the Underminer, 2 player co-op.
Justice League, 2 player co-op, same game engine as Baldur's Gate
ark Alliance, but level design is a bit poor. You can turn the blood off in Dark Alliance so that might be worth a go.
Marvel Ultimate Alliance 2, 4 player, better than Justice League.
Everybody's Tennis, Everybody's Golf 4, both 4 player. My kids enjoy both these games.
A couple of PS3 PSN titles are quite good.
Super Rub 'n' Dub is quick and good for taking turns.
Super Stardust HD has a two player mode but it is hard.
I like Toy Home a lot, this has competitive 2-4 player.
The BuzzJunior series of games is excellent for younger children. We have Ace Racers and Dino Den these are all 4 player.
Beijing Olympics official game from Sony is also pretty good. Very much in the mould of Track n Field.
What about sports titles? When I was that age we played a lot of Internation Soccer and Internation Basketball on the good ole Commodore C64.