Ooh, I remember that one time, in our country's capitol, Zagreb, there is an annual convention of technology and literature (much fun), and that one time I attended, there was a laser light show in one area.
I was stunned.
Anyway, lightshows come with 30 minute breaks, and during those breaks, an "interactive projector" was demoed.
It's basically a combination of your average "this-powerpoint-presentation-is-boring" video projector, and Infrared sensor.
It was projected top->down from the ceiling onto the floor. Stuff that was projected varied, like leaves or a pond of water with fish. When you touched the projected image, the leaves would get blown away or fish would swim away and water surface produced ripples - it was AWESOME, for both kids and us.
If you are looking for something like that to entertain your kids (which would make you one of the coolest dads, ever
), search for IR detection projector combos, or interactive projectors, or something of the sorts.
I haven't done any research but I'm 100% sure you could probably do-it-yourself out of regular motion sensors and digital projectors, both available commonly.
Let us know how the project goes!