I've been exploring fabric crayons. They turn out to be a lot of fun. Crayon drawing is whimsical and childish so I think it is very appropriate to use on kid's wear/toy embellishments. I like the fact that you draw on paper first and then transfer onto fabric. That way, you don't have to risk ruining your fabric. The only drawback is that the pigments only work on synthetic fabrics and most kids' clothing are 100% cotton.
Here is something I drew and transfered yesterday and the last picture is a bean bag that Evan, my friend's 4 year old, made. Not a good photo of his good work, but you get the idea.