Cathy Fink and Marcy Marxer have done absolute LOADS of kids' stuff (the great majority of their CDs & videos for kids have won "Parents' Choice" awards, American Library Association awards, and been Grammy Award winners/finalists.

Even more importantly, kids like 'em a lot!

Here's a link to their stuff for kids (there's two pages worth):
http://www.cathymarcy.com/store/index.php?option=com_virtuemart&Itemid=1&categor

Sue Trainor and Jennie Avila of female folk trio Hot Soup also have done some very well-received CDs for kids. (Links take you to their respective CDBaby pages, where you can find their kids' CDs as well as their other stuff)

Richard and Jess's CD is another brilliant one for kids.

AND I have to mention a CD for the parents of kids, A Parents' Home Companion, by Cathy & Marcy, which is one of my all-time fave CDs ever; has a bunch of songs that make me laugh out loud (literally), dealing with situations that all parents will relate to. It's a real gem!

There's so much great stuff - have fun picking...!