I go to twentypence's music classes (she posts on here) with DD (3) and DS (11 months)
She does a mix of unaccompanied songs and ones with CDs - the CDs are good as they use PROPER instruments and singing, none of that plinkyplonky synthesised crap. I think it's really important that the parents can sing the songs outside class (and not just by being urged to purchase some overpriced franchis CD). We also use the same songs week to week, always the same hello and goodbye songs etc, which is great - children love repetition. It's a good idea to give out the words to the most used songs.
We also use simple instruments - drums, chime bars, maracas, bells etc. And lots of things that emphasise basic musical concepts (scales, tonic-dominant, cadences, going up, going down, loud, soft, fast, slow etc.) but in a fun way so the children don't actually notice they're learning it as such. Also circle songs with the rainbow ring and the parachute, and lots of things were we move around the room - it's just not realistic to expect toddlers and crawling babies to sit still for long. And although wanderers are encouraged to rejoin the group (I am afraid at the moment the main wandererer is my DD ) they are never told off and it isn't allowed to disturb the class.
the best thing is that the classes are fairly small and numbers are limited and therefore individual - if the children are particularly interested in something e.g counting then we'll do stuff about that. Also she is very clearly a musician and as one myself I prefer that the teacher knows what they're on about rather than just blindly teaching a franchise.
ALSO I think it is very common for parents, especially those who are musically unsure, to very much stick to the 'rules' and be almost afraid of doing their own thing with music in case it's 'wrong'. I think it's really important for the teacher to let them know how music can be incorporated into daily life; it's not just for 'lessons' and you don't have to do exactly what you did in the class. E.g, make up other words to the tunes you learnt in class, sing songs about what the child is doing, have a tune for putting toys away, encourage the child to make up lines to songs, sing about the animals/people/houses/vehicles you see along the way, ask them questions about any music you hear, encourage them to dance. Music isn't just for musicians, it's for EVERYBODY and I think that's the most important thing for families to take away from a music class.
If you would like any other ideas I strongly recommend asking twentypence, especially re the babies. My DS has been going since he was a couple of weeks old and LOVES it. I think running a class where both toddlers and babies attend is brilliant as a lot of the time watching the toddlers keeps the babies entertained anyway. But you can also include them in circle songs, give them smaller maracas, get the parent/caregiver to do action songs to the baby whilst the toddler does them (along the lines of heads, shoulders, knees and toes etc.)
Cost wise, we're in NZ so no point comparing it, but they are pretty cheap really. We pay for a term in advance which I think is fair enough, especially when class sizes are small - occasionally we go to another very large drop in class which is utter CHAOS and rammed with overexcited children - we far prefer the smaller classses and from the point of view of the teacher, you need to ensure that you have a regular income. if you run a class for e.g. 30 then it's a lot easier to charge per session.
You don't actually need a lot of fancy equipment, but lots of parents really won't think they're getting value for money if you don't have a fair few sets of instruments and props (as has already been pointed out); it's probably also always worth emphasising that the instruments are washed every time, especially for mothers of PFBs!
I have gone on, but am hopefully going to start doing preschool music classes of some sort myself so it is a subject close to my heart....oh and ours are 30 mins which I think is about right, DD could go on for longer sometimes but then we do lots of music all the time, which brings me back to my point of enabling parents to incorporate music into everyday life