I saw a good article on traveling with kids to Mexico City in the New York Times. I love Mexico City. The food is fantastic, better and different than any Mexican restaurant I'd ever been to in the United States. The people are warm and friendly. The architecture is European in style and beautiful. And the museums are spectacular.
However, any parent has to be very cautious about the crime, especially as an American tourist. The article points out the basics: don't grab a taxi off the street, don't use an ATM... I'd be more cautious than that, however. There are just too many stories of muggings and kidnappings in Mexico City to let your guard down there, especially if traveling with kids. Forewarned is forearmed.