``The key to it all is that kids own their machine, so all the admin stuff (networking, power management, etc.) *needs* to work within a consistent, simple GUI.``
That view, and the Sugar UI FWIW, stem from a completely flawed understanding of children. Kids are inherently quick at learning and highly adaptable. Give them a Linux or a Windows UI and they'll thrive, taking that knowledge with them and building on it to adulthood.
What Sugar did was try to lock them in a world of Fisher Price toy simplicity, as if they were intellectually retarded. None of the UI knowledge of Sugar would benefit them later. It thoroughly deserved to fail.