I have no issue with killing kids in games, none at all. Read this carefully because you may or may not have heard or though of what I'm about to say.
For starters, anyone who will tell you that they have never considered hurting or killing a child, even their own, is a liar. Oh sure nobody does it for the obvious reasons, but even the most tolerant parents and teachers will talk about how they would love to put a kid prone to brattiness out of their misery. This kind of thing is often also played for laughs in comedy movies where you have little kids being unusually obnoxious (beyond real life) and getting the audience to go "wow, I'd kill the little Sh@t". In general child homicide has not featured heavily into movies, but brutalizing children behaving like that for "laughs" has been done and taken one step short. A couple of good examples would be what Will Smith's character does to a neighborhood bully in the movie "Hancock" and what Jim Carrey does to a bratty little girl in "Me, Myself, and Irene".
Call it mature or not, but to some extent being able to just haul off and blow a hole through some obnoxious little Sh@t's head is just another bit of escapist fantasy that has nothing to do with real life at all. Oh sure, maybe it disturbs some people who don't want to admit that they have thoughts like that when annoyed, but that doesn't change the reality of the situation. The point here being "grow the F@ck up".
On top of this, children are very capable of violence and being used in both warfare and crime. Today you have kids 11 and 12 who are hardened gang bangers, and throughout history you have had groups of child soldiers like "The Hitler Youth" or "Saddam's Lion Cubs", not to mention what you see with child soldiers today in The Middle East and Africa. In fact, during the final days of World War II we killed a lot of children and other people that would be considered "non combatant" since it was nessicary to defeat the Volkssturm and Hitler Youth. Of course people tend to forget that.
In the context of a game involving barbarism, like say a Post Apocolyptic setting, kid just being another target/threat makes sense since they are going to be just as jaded as the adults in that enviroment. That's part of things being brutal and harsh. I have been quite disappointed with current games portraying such enviroments pulling those punches.
In all cases we are dealing with the kind of seperation of fantasy and reality that makes such things "M". A younger crowd might not understand all of the nuiances of this kind of thing and walk away with the wrong impression.
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To some extent I have a bit less respect for the artist and original Fallout 2 team that I did before hand. Trutfully that picture is incredibly disturbing and just... wrong. That is exactly why it should have been in the game. The entire point is for an adult who is presumably already jaded to look at that and go "WTF".
I think it's contridictory to set out to be shocking and then pull punches because you succeed. With Fallout you WANTED people to go "That is sick and twisted...." as they are playing.
Such are my thoughts, but then again I figure I'm not exactly what anyone would call a 'good' person sadly. :/