Well, the good news is that it's a cute little display piece if you love the 400 & 500 series sewing machines.
The bad news is that even with the correct needle, trying to sew with one of these machines is so frustrating that it could put someone off of sewing forever. :(
There are some "Sew Handy" models that produce a very nice chain stitch - the model 20, if I'm remembering right - but this one has a reputation for being impossible. I'm pretty sure that I had one of these when I was a little girl.
With the case, though, and in the condition it's in, it's a darling little collector's piece. I would buy it in a minute. :)
A hand crank is a great machine for a youngster to learn on - it's not as intimidating as an electric machine and the child can sew as slowly as necessary to keep control of the seam. An antique 28/128 or a more modern 99 or Spartan are all easily convertible 3/4 sized machines if they're not already configured as a hand crank. (I've seen dozens of 28/128's for sale over the last few years and all of them were equipped with hand cranks except for one 128 treadle which I bought. :) )
The toy machines, unfortunately, rarely function as a real sewing machine. Kind of like the toy irons we had when I was a little girl. They got warm when you plugged them in, but not hot enough to actually iron with them.
I bought a small Janome for my 8 year old granddaughter to sew on - it has a slow-fast switch and the size isn't intimidating. It's the same machine as the Hello Kitty models, just painted in "big girl" colors. Lots of people buy this machine to take to classes and retreats because they sew so well and they weigh so little. :)
Good luck - it's a really cute set!