Now there's a game that deserves it's M rating by other means than boobs and gore. More games should deal with those kind of dilemmas.
Of course, the game still has a fair amount of blood in it anyway (though no nudity, to my knowledge, even if the desire demons come... about as close as they can without just doing away with the clothes entirely.)
However, most developers prefer to avoid the issue, and for good reason, besides, having one quest where certain decisions could force a child to be killed is a bit different from letting the player just kill any child you want just because you can.
But I don't really care much either way if there are children in the game, of course, it would be realistic to have them, but children are not high on my list of things that need to be in the game. Generally, if I don't see them, I tend to just ignore the fact that they're absent, considering that where an Elder Scrolls hero goes people are likely to die at some point, whether by the hero's hand or not, children really have no business associating with Elder Scrolls hero's anyway. And if Bethesda wants to avoid potential controvercy that could arrise from children being killed in a game by leaving them out entirely, that's fine with me. On the other hand, if they go with the tactic of including unkillable children, I'm fine with that too, not having the freedom to do something only bothers me if it's something I'd want to do if I could, and since I have no desire to kill simulated children, I don't mind not being able to do so. Bethesda just needs to make it so that they
won't fight back if attacked, and will just run, otherwise they should simply be programmed as essential NPCs, because if they're completely impossible to even temporarily knock down, fight back when attacked and you just happened to accidentally hit one... well, a child would be a more terrifying foe to face than a Daedric Prince.