I think it would be a great buy, though for kids you might actually want the extra speed of the T4i (just came out).
Yes, the lenses are interchangeable and compatible with any lens that works on your XS.
You'll love the addition of the video for family work.
Equipment: Enough. For now.
Quote: 'The only thing some people will believe is their own eyes. But in the realm of the quality of a printed image, is there really anything else that can be believed? '