Hi.
This is my opinion based off of my last visit there last year. I'm told the show has changed.
Here are some things to consider :
1. It's not scary but there is fire which might frighten some children.
2. Some of the dancers are in skimpy (but not revealing) luau outfits which may bother some parents.
3. It's not really as upbeat or "fun" as other Dinner shows and features no Disney Characters that I recall. To put it bluntly, some children might be bored. When I went with my then 4 year old DN , she slept through the luau.
4. On the other hand, some children like music and dancing more than others, esp little girls who want to be Lilo.
All in all, I would say, like anything else, it depends on the child. If you have a little girl who dreams of being Lilo or a little boy who is obsessed with Stitch, the luau might be perfect for them.
Another , more kid friendly show is the Hoop Dee Doo, which involves much more audience participation and I think children tend to enjoy much more. It's brighter and has more sing a long type songs.