I have some experience with this problem. You're right that microcontrollers are too advanced, everyone gets bogged down in the development tools. I also find that most types of IC and transistor circuits where you can't SEE what is happening don't really work out for most kids.
A few kids will get really into it. The next group will 'sort of' get things to work by following the directions, but not understanding what is actually happening. The rest will just sit there while everybody else plays around. They won't even try.
I have found that the basics like lightbulbs, batteries, and switches really get kids excited. They can see what's going on and they understand it and start building on it. Flipping a switch or pressing a button to make something happen is very empowering.
Next, if you can get a hold of some nice relays, especially ones with clear housings, they are really useful for this. It's a switch that turns on another switch. They understand it. (especially with a DPDT knife switch to explain things) Try a reed switch and a magnet, controlling a bulb through a relay. (small switch controls big switch... They learn about current) Let them try the NC contacts. Show them a relay LATCH. Connect the coil through the NC contacts for a relay buzzer. Add a speaker across the coil for a louder buzz. Can you combine these and make a burgler alarm? Show them that a mechanical bell or buzzer is the same as the NC relay buzzer. Next, put a capacitor on the relay coil for a delay. They will UNDERSTAND all this and get into it. And they like the clicking.
This lets them learn by using things they understand like switches and bulbs which are all doing things they can actually see. There are no black boxes at all. Also, a lot of kids want to ignore you and just play. With these parts, they can still make things happen and learn just by messing around. Can they get the relay to click? Make the bulb light up?
I've taught a lot of workshops to beginners and most breadboard type stuff really just confuses them. It seems they have made up their minds in advance that this is something they can't do, it's too hard. With the knife switches, batteries, bulbs and relays, they got really excited. When we added the capacitor they really understood what those did. It seems that this is a necessary first step before you move on to 'black box' parts.
Once you've gotten them there, the next thing is an optoisolator, which is really just a relay. Then they're comfortable with a DIP package, and you can proceed to the 555 and such with the ones you haven't lost. In the meantime, skip all semiconductors completely, except the rectifier diode, which they understand, and maybe the LED (with resistor already soldered on).
As we get better at electronics it becomes more and more difficult to understand what it was like to not know anything about electronics. You try to explain a 555 or op amp and there are a thousand details that you're taking for granted without knowing it. The other person really can't get it without the details, which makes it very hard to teach the subject without losing people. This is why you should go for the basics as much as you can. Let them play in that safe zone and master it and build a foundation before moving on.
Skip Ohm's law and the RC circuits and the math stuff for now. Let 'em turn things on and off. They'll get it.
List: Knife switch, lever switch with roller, button. Reed switch and magnet. Buzzer, bulb, rectifier diode. Clear relays, at least SPDT, DPDT better. Capacitor that can hold the relay on for 1 sec. LED with resistor installed. Speaker with resistor inline (so it can go across the battery without blowing up) . Batteries to match all these (9V or 12V is easiest)
Show them some examples and let 'em go nuts!