Two things I have done with my daughter, who is 4:
I bought some plastic canvas and let her practice sewing with yarn and a blunt needle.
Also, I cut cookie cutter type shapes out of felt and made dots around the edges to show where to sew. Put two shapes together, sew together, leaving a gap, and stuff. She did really good at that, actually.
I've found she has a short attention span, and after it is exhausted, she's going to do things deliberately wrong just to get my attention, so when she starts making mistakes I just put the sewing away.
I haven't let my daughter use the machine at all yet. I know she's not ready to give it the sustained attention it would require.