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Disney's Toontown Online - MMORPG
Great online game for kids. Create your "Toon" and battle the evil Cogs using gags like a seltser bottle and cream pies.
Chat system only allows toons to chat via a menu system unless the toons exchange a password offline from the game (basically, you'd need to know another player in real life to do a regular chat with the other player) so as to help keep conversations clean and at a kids' level.
Many mini games available as well as housing and lots of areas to explore.