Since I'm just a big kid myself, I like the casual approach with kids. If they aren't comfortable dressed as if they're going to the Oscars, (how many kids are?) then don't make them dress that way. A decent pair of sweats or nightgown and a little clowning around & voila! MAGIC!

In circumstances when the costume is integral to the shot like a Communion Portrait I try to make the young person as comfortable as possible with a few prankish distractions & easy poses.

Did you ever notice how you get the best expressions from your loved ones when you just shoot them with a throwaway camera? Well, I don't use a throwaway, but much of my best work with children is accomplished on location in familiar surroundings with minimal equipment.