The nice thing about digital is you can use just about any kind of light. The key is to use the same lights. If your using regular incadecent bulbs make sure they are all the same type (prefferably same manufacturer and wattage from same batch). Same goes with the new twist bulbs. Some now list their color value, others don't. So, its good to get the same ones. If you don't know what I mean about color. For incadecant its, soft white, cool white, etc. Same goes for twist or tube light. Some go by soft, cool, daylight. And others actually give their K value (2500, 3200, 5000,.. etc). Just make sure what ever lights you use are the same type.
You can adjust your white balance to the lights since they will all have the same color cast. As for using lights with the same wattage. Just moving them back or closer will change their levels on your kids.
As for softening the light. Something as simple as a white sheet infront of the light may do the trick. Something to diffuse the light so its not so harsh. If you try those 250w or 500w halogens, bounce them off a white sheet instead of straight at the kids.
Next thing to watch for is a color cast off walls or the ceiling if they are not white or nice neutral color.
But it can be done without expensive gear. Even a good window with lots of sun can be used if you have reflectors and such. Set up takes longer though. And not as easy to use / modify as true photo light sets.