I don't have a lot of experience with this, but here are my thoughts.
At my mom's funeral, there were no kids there. It was all just a somber, sad, rotten thing (I'm sure those with similar religious beliefs to my stepdad felt uplifted, but those of us who didn't were just horrified at what was being said). I was desperately sad, and because I was single and had no outside responsibilities, I had nothing to do but listen and wallow at the funeral.
With FIL's memorial service (which was different b/c "he" wasn't there and it was a solid 2 months after he died), there were TONS of children there, including our 2.5 year old. Hubby was able to come away from the grief and the traditions to get hugs from DS (and me), and it let him come up out of his grief, and he had other choices but to just wallow.
I went to my oldest friend's father's memorial service, and there were several children there. Although the service was tremendously sad, and I think I still have the headache from the crying (it was last spring), having the children there was a GOOD thing. Their "beautiful noise", to quote Neil Diamond, was wonderful, and let the mood lighten just a bit while we all were SO sad for such a wonderful man.
So I think kids at a service aren't a bad thing for the service's sake. They can also help the close relatives, because it gives them something to do other than cry. And kids tend to come with built-in hugs.
She's now 30 and has said repeatedly to both of us through the years that she's upset that she did not attend that funeral because she never felt she got closure with her "Poppy." She says she feels like he just disappeared. I
It makes me sad for her and that memory, and I feel bad that I didn't press the issue. Even taking her to the cemetery many times, never took away that feeling.
I would hate for some other child to end up feeling that way about someone they had been so close to.
I wonder if she could put together a little service on her own, or with a clergy member she's close to? I was at my mom's funeral, but it brought NO closure whatsoever, because it was so soon, because I actually hadn't seen her for months (I kept getting sick, and you can't visit someone with leukemia while you're sick) before she died, and because it was just the antithesis of what I believe, and fairly off from what SHE believed, too. I've often thought about putting together a memorial service that I think SHE would have appreciated, one that didn't insult her children, one that didn't insult me... I feel that that would bring me more closure than the official funeral did.
Maybe it's worth a try? But really, just being at a funeral doesn't mean you'll have closure; she might not have had it even if she had been there.