I have two children, ages nine years and not-quite-seven years. Last spring, we got the two of them each their own Kindle Fire, complete with Free Time Unlimited.
First of all: yes, it’s worth getting the kids’ bundle. The kids’ bundle comes with the Kindle Fire itself, a 2 year replacement for any breakage plan, a shock-proof case, and a year’s subscription to Free Time Unlimited. It was $99 when we purchased the bundles–and getting everything separately would add up to around $150.
Second of all: yes, it’s worth getting the Free Time Unlimited plan. You can set ages, and the plan doesn’t allow them to stream video that is inappropriate to their age. It doesn’t allow them to play any games that include a chat feature (i.e., pedophile bait). It doesn’t allow them to make any purchases–they’re limited to free streaming, or books in the Free Time Unlimited library.
Third (and best) of all: you can set daily goals and limits. Currently, we have the Kindles set to NOT come on before 8:00 a.m. to avoid arguments about turning it off to go to school, and to shut off for the day at their bedtime. Weekdays, they have to read for half an hour before they can access any games or videos; weekends, they have to read for a full hour. And Amazon provides a parents’ dashboard, so that you can see how much your kids are reading, what they’re reading (tailoring gifted books to their tastes?), what they’re choosing to watch, and what types of games they like to play (and yes, there’s a time in app reading given on both of these, as well).
Overall, I really do think these are an excellent first tablet/first reader for kids. And with the parental controls Amazon offers, parents don’t have to absolutely hover to ensure their kids’ safety, granting both parents and kids a bit of independence from each other.