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Babay is a nice new-style Vietnamese restaurant on Capitol Hill. If your kids like Vietnamese food, they are kid friendly - don't expect a kids menu with chicken fingers and fries though.
Most restaurants on the hill are "kid friendly" because they have no choice with the number of kids living in the area.
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You've gotten great recommendations so far - esp. Good Stuff. I'd also add Seventh Hill Pizza, which is in your neighborhood. The hot half smokes in natural casing (there are other hot dog / sausage choices as well) at the meat store mid-way down at Eastern Market are fabulous - you put on the condiments yourself and they cost $2.00 -- no seating though.
We The Pizza is next door to Good Stuff - they are both owned by Spike Mendelsohn of Top Chef fame. We The Pizza has excellent homemade sodas (the Very Very Sour-ry Cherry is my favorite). Good Stuff has excellent burgers and FABULOUS shakes - the best in town.
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re: woodleyparkhound
Really? I've never been impressed with Good Stuff: dry, expensive burgers. The shakes are alright, though.
http://aht.seriouseats.com/archives/2011/08/good-stuff-eatery-burger-review-washington-dc.html
I was actually impressed with Bullfeathers. They're owned by the same team running Tunnicliffs and Stoney's, so they know how to cook a burger to order. And for a Hill eatery, their kids menu is pretty extensive and their shakes are solid. The pizzas were pretty decent as well. The last time I had a pie at Matchbox, the crust was tasted like Red Baron frozen pizza. The sliders, however, are still good.
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Zest - 8th Street SE - it's at the very end of Barracks Row. Owners have two young boys so there is a pretty typical kids menu for the little ones, and a very nice straight forward and well executed menu for the adults. If your kids are too old for the pasta w/ marinara and chicken tenders option the normal menu has plenty of choices that they should find appalling.
Strolling back up 8th street provides plenty of pop-in after dinner options (frozen yogurt, cupcakes, ect.) and a couple of funky stores fore casual "window" shopping.
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