I remembered reading a review from Amy at Peek-a-Boo Pattern Shop, after she had bought her daughter a machine. We ended up going with the same one, this Janome. This is a half-sized machine and is basically the cutest thing ever. It comes in a variety of colors, you don't have to pick pink ;)
One thing I read was to avoid toy machines, which are usually chainstitch machines and won't really sew real seams. This Janome could be a kid's machine, or a good compact travel machine for simple projects. It has 10 stitches, reverse, and a unique pressed foot that prevents anyone from sticking their fingers under the needle. AB is turning five next month, but she can be a bit absentminded, and I feel better knowing the presser foot is guarded.
The biggest con you'll see about this machine is the lack of a light. For the price, especially not knowing how much she'll sew, I can live without a light. I just put a lamp next to her. One other thing to note is that it only works with a certain size needle (it's escaping me at the moment but it was a size 14 I think). Obviously, it's not going to sew 10 layers of denim or anything, but I have other machines for that purpose.
I did thread the machine and bobbin for her, those things might be too tricky for a 5 year old. But once we were set up (which didn't take long) AB sat down and sewed her first item without much trouble. I sat with her and helped her guide the fabric properly and place her hands in the right place. We made a simple flannel blanket for H's new baby doll.
Normally AB gets easily frustrated or bored with new things. I was pleasantly surprised that we were able to sew this blanket together without either of us devolving into tears. I can't quite explain the feeling of sharing something I love so much with my own offspring. It was kind of surreal and amazing and I hope it's something she continues to like as she gets older. If not, that's okay too, I do have two other daughters behind her ;)