This is essentially two questions:
1) Should we be allowed to kill children
I remember in Ultima V - in the Hythloth Dungeon - there was a room full of "children" that were hostile and would attack you. You didn't have to kill them, you could evade them or leave but you could also kill them without any penalty. No explanation was given for this scenario - and Richard Garriott later admitted that he put it in to get players to consider their actions. An employee resigned over it and the scenario was to show up in later editions of the game as well.
Fallout 2, and 3 you could sell children into slavery and kill them with impunity.
I understand it was a different time, but I have always been firmly on the side of an RPG being a sandbox and not a crib - but we do need to make a choice, or at least Larian does. Also it's important to understand that there are ways to discourage certain behaviors without destroying immersion by simply preventing it. So yes, you should be able to attack/kill anyone you want - but obviously if you do attack and kill children there are going to be harsh penalties, not limited to people leaving the party, and open hostility from all "Good/Neutral" aligned groups.
2) Is there a difference between killing Goblin children versus Tiefling children?
At this stage the game seems to think so.
Halsin kills Goblin children's in the shattered sanctum prison but he banishes Kharga from the grove for killing a tiefling child accidentally.
The subtext here seems to be racial genocide is ok. This may be unintentional, but it is also unmistakable. Given that Goblins are "culturally" evil (taught evil) but not "inherently" (like demons/devils) evil - this is somewhat problematic.
Anyway, great question.