As I read through the article, I found myself agreeing with some points and strongly repulsed by others, but overall, I was able to pick through it and find enough that is useful to make the reading worthwhile.
Here's a passage that particularly inspired me:
The best software, like the best play materials, should provide a tool that allows children to explore the world creatively, using their imaginations to manipulate and assimilate knowledge about the world around them. A successful design gives children control of the computer environment and allows them to set the pace of the interaction.Design activities to be inherently interesting and challenging so children will want to do them for their own sake. The best interactivity models real-world play scenarios that children are most interested in (e.g., for preschoolers, dress-up and fantasy role-playing, construction play, drawing and coloring, action figure and dollplay, etc.) and uses intuitive, logical and familiar procedures for accomplishing activities.
-- p. 16
My first thought was that it would be like stickers, except more oriented towards arranging a story. Each scene could be accompanied by speech or by text captions (for the older kids). The scenes could be output as a collection of web pages with .wav files accompanying them and navigational buttons to go from one scene to the next.
In its very simplest form, such a feltboard story creator has a fixed set of characters with very simple placement controls, something like ktuberling (a "Mr. Potato Guy" from KDE games). You have a canvas, and you drag (without rotation) characters, clothes, and so forth onto the canvas.
At its most complex, parts could be rotated or joined together with "pins" at the joints so you could pose characters, and the parts themselves could be extended by a child artist in an integrated editor (probably borrowing and embedding someone else's editor).
Sound integration I have not thought out so clearly. Perhaps recording facilities are not available, in which case a simple pallette of "canned" sounds would be nice, like "moo", "meow", "hi!" or "bye!". These could be associated with characters so that when the character is clicked (or mouse-over? javascript?) it makes that sound (like lletters, in which you can click on a letter and a picture with a sound representing that picture is presented).