You have a wide variety of established musicals from which to choose and virtually all are appropriate for children. "Guys and Dolls" and "Oklahoma" are great musicals for kids but there are a wide array of others that are excellent as well.
While it's fantastic to have an entire band accompanying the show, a single pianist will be just fine. This person needs to commit to the rehearsal process and be available for every show performance. Usually, the accompanist will help instruct the kids vocally as well.
Hold auditions. If you are directing the children's musical as part of a school or recreational program, you likely already know the specific children who will be in the show. You still need to hold auditions to determine who will play which role. For the audition, have the kids sing a song, preferably one from the musical in question. You should have them perform a page or two from the script to gauge their acting abilities. Finally, put them into groups of five or so and teach them a basic dance number. When they perform the dance number for you, you can determine each person's dancing ability.
Establish a rehearsal schedule. You should map out exactly what you will be rehearsing each day. This includes which songs, dance numbers and scenes you will be working on that day. Make sure you have adequate time to work on the entire show before dress rehearsal. Once you have worked on each component individually, you can then begin to put the show back together.
Recruit volunteers to help with costumes and set creation. Parents are often readily willing to help build set pieces and sew costumes. Most kids in the show will wear just one costume for the entire show, though your leads may need a few costume changes. You can keep the set pieces fairly basic. Paint and props can go a long way to create reality on stage.
Children need more straightforward direction than adults. If you make your directing notes too complicated, they may have trouble implementing your notes. Instead, aim to state things clearly and slowly.
Remember, more than anything, children's musical theater should be a blast for these kids. While you want to ensure the final production looks great, remember that the environment needs to be safe and fun.