I have looked at that one too. I bought the small cheap Kodak, a real camera, for half that price (2nd hand). To me that seemed a better thing to do. I also initially opted for the Olympus Tough.
I guess the most important thing is that you buy your kid a camera, whichever one that is
I am amazed with the images he has come back with over the years. It is also a lot of fun realizing you are looking through your childs eyes. By now, mine comes back, he transfers the images via Lightroom 2 into his MBP and works on it in LR2 and PSCS4 with his Wacom Intuos3 tablet
(all software, MBP and tablet are my old ones). He is 7, can barely read and write yet but this is one area he is quite capable in