Hi RRMan,
I'm coming a "little late to the party" but for future reference, I can recommend the RailKing 12-piece figure set #2, 30-11029. The figures are more like S scale and it does include a (only) couple of seated children. But there are adults, too, that are small enough to pass for children. And they are so well behaved, too. If you can find them, K-Line 0-scale has some small seated figures. They are smaller than the standing figures but bigger than the MTH ones, and so could possibly pass for older children/teenagers.
I was planning on doing something similar one day with my N scale train to commemorate a park train that I rode as a kid. It's nice to see that you made such great progress with your project.
Tomlinson Run Railroad