I think what I would do is iron Steam-a-Seam 2 to the wrong side of lots of different fabrics. I would also iron freezer paper to the wrong side of white or cream muslin (and/or other colored near-solid type fabrics that would make good backgrounds), then cut into large rectangles. You could cover an inch or more of the rectangles with blue painter's tape (so they don't use the edges).
Assuming the children can use scissors, they can cut pieces out of the SAS fabrics, peel off the paper backing, and arrange them on the backgrounds as they like. When they are satisfied with their pictures, you can iron them to make the fusible permanent.
There are inexpensive paperboard "canvases" you can purchase at art stores (and JoAnn Fabrics has them in the craft area). If you coordinate the size of the background fabrics with the size of these canvases, you can use duct tape to tape the finished fabric picture to the canvas. Parents could actually frame these by purchasing a frame with mat.
Edit: To make it even easier for the children, you could first cut a variety of pieces out of the fabric for the children to use. For example, you could cut lots of leaves and stems from green fabric, lots of flower petals from a variety of other fabrics, maybe some circles and rays for suns, maybe some geometric shapes for those who might want to create robots, etc.