I always just kill the kids because they run to go get the guards and I don’t like that. However, you can be threatening and also spare the kids quite easily. What you do is, tell them to stop, the battle initiates, then they both disengage and start running to get the guards. They run out the door, three guards come rushing in. Then the kids are gone. You don’t have to kill them or fight them. You just have to let them run away. The goblin who gets crushed under the cage door is an adult goblin. Problem solved!
