I recently gave my two kids, Blaise and Dorthe, each a dwarven dagger. Is there any other use other than them practicing on the dummy?

I don't think so. Kids don't fight, they run.

You would need the PC version to mod their attributes so that they would defend themselves. It could probably be done using the console with 1 command or 2. Bethesda had the child voices actors record combat sounds like grunts and taunts and even death sounds so I think it would work.

QUOTE: Kids don't fight, they run.

Good thing. If they fought, they'd be unbeatable: it's impossible to even hurt them.