I was wondering how I would go about make the training dummy useable for children without them stretching, any help would be appreciated.

The only way to make the children not stretch is to convert the adult animations, or make new ones, in Blender. And if you are up to it, make sure you name the animation exactly as the adult one, except for the a_, you'll need to change that to c_ for it to work for children. I hope this helped

Thanks, but I'm new at this and don't know how to convert adult animations or make new ones, How would I do that?

I can show you, since I do it a lot for my mods. Or, I can post a link to a tutorial on here later (since I'm on my phone...). But do make sure you have Blender 2.67 I think it was, the CLIP tool plugins to import/export animations, the sim rigs to actually animate with, and S3PE to get the game to read the animation. But beforehand, it's always best to test if children can actually use the Martial arts thing, because if you enable it for children (since I'm assuming you know how to do it), make sure that option is there, because if it's not, then the interaction is, hard coded I think. Good luck with everything!

Edit: Here's the link to the tutorial, though the person explaining does swear/say slang words in some parts https://www.youtube.com/watch?v=EmHLZa3GxWE

I already comverted a lot of the animations. The reason I have not uploaded anything yet is, that the children stand too far away from the dummy and from each other while sparring, and I have not yet figured out how to change their position in Blender.

What I'd simply do to make sure that the children hit/kick the dummy or whatever is to import the dummy object into blender and it's animations, and add IK targets to both hands and feet of the sim rig and re-animate the hands so that they don't miss the dummy, and the best part about the IK targets on the feet is that they don't move around unless you move them, so that prevents glidy feet and /or sinking feet.

Learning how to do stuff in Blender is on my todo list^^ Right now all I ever did is convert Animations from adults to children. Do you know a good tutorial (or several) for those steps?

Awesome, I do have an animation tutorial here on MTS, but it's quite outdated, like there's many better ways of animating than that tutorial. I do however, have a tutorial on my YT channel on adding IK targets and things to sim rigs, which is actually really easy if you follow the steps correctly, and I also have another sort of "tutorial" on making good facial expressions but it's not so important.
And, I won't consider myself as a complete pro at Blender yet, but if you have any questions, I'd love to answer them for you! :D