Just wanted to share the experience of looking high and low for children's headphones that I can be sure won't damage their hearing.
There are a few products that claim to do this, but most need to be continually fed with batteries. I tracked down the dB Logic EP-100 earphones that limit volume to exactly 85 decibels (considered safe for listening over long periods) and don't require any batteries. It's very clever. You turn the volume up on the MP3 player and the earphones automatically turns it down!
The dB Logic headphones actually have really good sound quality and I'm no longer worried that my two boys will damage their hearing by listening to their music for hours at a time. Highly recommended.
This type of sound limiting technology should be in all children's headphones!