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The Sesame Workshop and PBS produce excellent Flash sites for kids. Among my favorites are the Sesame Street and Arthur sites. The recent redesign of the Sesame Street site adds new navigation options, a more YouTube-like video section, and most notably, user profiles. The best of the new features is the ability to add favorites to "Your Street," a user profile page that uses your favorites to display a start page. The refresh keeps Sesame Street among the most usable web sites for kids.
One of the things that I really liked in the prior design was the Muppet navigation bar that ran along the bottom of the interface. When my child was pre-literate, this let him explore the site easily, while the voice-over of each link label reinforced the spelling of the names. They do a lot of that still here, but the Muppets are now a level down. Once you're within each section, however, the site utilizes a lot of narrative for help, illustrations, and pictograms for buttons.