Argie's, FWIW, we have two small children, younger than yours, and it's been fine. We have "free" wood, but it makes all the difference in the world in our oil bill - we had it installed about a year after our first was born. They make iron fences for woodstoves if you are really worried (sold in the Plow & Hearth catalog). Ours is elevated, so the kids can bump their shins on the hearth, but it's very hard for them to run smack into the stove.
One of our cats jumped right onto the top of the woodstove early one winter - ouch! But she was fine and has never made that mistake again.
We found the woodstove used for $175 (a Vermont Castings Vigilant) although that was in summer. And, it was about $1200 to have the Stove Barn folks from Concord install the chimney. Another $300 to create the hearth out of slate tile and cementboard (we did that ourselves).
When it gets really cold, we will run a new electrical space-heater (the safest one we could find, and it shuts off when tipped over) in the kids' room or the kitchen, but it makes me nervous - it has to be pretty miserable before we'll do that. I can't imagine we'd have to do that in a newer home - ours is very very old and leaky.
We are hoping to install radiant floor heat in the bathrooms and tiled areas over time to help with the comfort factor in our home. There's a DIY company in VT with a website.
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