Speaking of children--
I think one thing that could really add a lot to the game is inheritance of magical abilities (when magic comes around) and equipment from your ancestors.
If anyone's played Monster Rancher, they know that it's almost impossible to get a champion monster off of your first effort. What you do is get a pretty good monster, then retire him and breed him with another pretty good monster and you've got a kid who starts in a better position, allowing him to advance further and further etc.
So if Grandpa Olaf traded his left eye to a demon for the ability to read demonic text, he could pass that ability on to his two-eyed son who could recover some ancient tomes of magic from a goblin fortress, who could translate them and pass those onto HIS kid, who would have access to the powerful demonic magic right out of the gate--allowing them to accomplish feats in their lifetime that their ancestors never could.
Obviously that's probably too specific an example to match up with what you're thinking of, Toady, but is that the general line of thinking you've got in place for the gameplay aspect of families?
Also, when will we be able to use DF skills (like fishing or farming) in single player mode? I want Harvest Moon: Dwarf Fortress :p