As the wife of a soldier currently deployed I thank you for thinking of the soldiers and the Iraqi children. Here's what I send specifically for dh to hand out to the little kids...
Lots of individually wrapped hard candies. These are easy for dh to tote in his BDU's pocket. The candies aren't bulky so he can easily take a handful with him and hand out one or two to each child he encounters.
I also send the small toys that come in kid's meals at fast food places.
New, unsharpened pencils and erasers are great, too, as the kids often have no school supplies.
These are just a few suggestions if you're looking for things to send that will put a smile on the faces of the kids and the soldiers. It means a lot to the soldier to be helping the kids out. My dh is partial to the little girls b/c we have two of our own. He says looking into these kids' eyes is the closest he can get to being home so it makes his day to see the little kids so happy.