For me, the smallest I'd go for would be a PSR-S750 or a second hand PSR-S910. A lightweight fully adjustable X-Stand would allow the use of any available chair if I wanted to be seated.

The onboard speakers (especially the S750) would be powerful enough for intimate setting gigs and the OS would be something with which I'm already comfortable.

They both have stereo outs, dedicated MIDI ports, and oodles of third party styles available at PSR Tutorial.

The Korg microArranger is a nice piece of kit, but the different OS and the smaller keys would put me off, and, I'm not sure if I'd want kids learning on a non-standard sized keyboard.

The newly released PSR-S670 looks real nice, especially since it has all the fingering options (including on-bass) and stereo outs, and, although it has no dedicated MIDI ports, it does have a lot of arps and more modern styles that kids would be more interested in.

Also, if there are replacements for S950/S750 on the way, you may get an S750 (essentially an S910 with no mic input or VH2) at an attractive price.

Ian