I lived there a while back (2000), but still have friends with kids who live there now. For what it's worth, I lived in Dubai afterwards and much prefered Kuwait.
Yes, it's dry (alcohol-wise), but it's not really. You make your own (apartments are big so usually one room is the bar), or you smuggle drink in (not as dangerous as it sounds - if you're caught, they just take it off you at customs).
Eating out is great, and much cheaper than you think because you don't pay for over-priced alcohol. There are some fantastic restaurants, with very high standards and the range of cuisine is amazing.
It's hot, no denying it, over 50 degrees in the summer, but you just need to make the most of the other seasons and accept that you do not have a great amount of outside time between June and September. However it does get dark relatively early (7pm) so you can swim in the evening without getting burnt! Most friends with children do come back to cooler climes in the summer during the school holidays and visit friends and family.
Schools vary, there are a number of English speaking schools, some are great, some less so. Friends are teachers at Kuwait English School, they send there own kids there and are very happy with the standard of education.
The driving is crazy and you need to be a confident driver to take it on. Roads are good, but many people have extremely powerful cars and think they own the roads. Driving on the hard shoulder was commonplace as was overtaking on the inside and people drive extremely fast.
We didn't live on a compound, there was no need. Its very safe, and people are very friendly. You are a little limited in what you can do -i.e it's a small country, but for a couple of years the beach/pool/bbq/desert life/shopping is enjoyable. You are also quite centrally located for reasonably cheap flights to other parts of the world for holidays. There are no real dress restrictions, you wouldn't wear shorts out in the souk, but at the beach club, bikini's are fine.
Hope this helps.