I bought a PS3 recently for three reasons: firstly, I can't stand the noise and heat that the 360 outputs, but the recent ability to install games should cure that (although I would get a hard drive version rather than the Arcade to do this!). Secondly, I wanted to play games online over wi-fi. Xbox Live and the wi-fi adapter would have cost me the majority of the price difference between the PS3 and the 360. Finally, most of my mates have PS3s and I wanted to play online games with them.
I'm chuffed with the PS3-it honestly impresses me every time I turn it on, and everything about it just works sleekly and smoothly. That said, if price is an issue, and if you don't need Live and a Wi-Fi adapter (I assume the kids won't be going online?), the Xbox may be a better bet for you.
I would definately go for one with a hard drive over one without one though. I personally find the noise of the 360's disc drive unbearable, and would definately want to install my games if I ever bought one.