+1 Nook HD
Bought one for my 7 year old daughter and it has been great so far.
The tablet has 8GB but can be expanded using a micro SD card.
The Android implementation is bit different from normal but it has run everyone so far and you could always root it to get a vanilla Android experience if desired.
I actually quite like the Nook version - it is really simple to create profiles for individual users and so limit what the kids can do.
The only issue is it does not have a camera so apps that use these are not supported.
PC Pro liked it