I let mine use their iTunes gift cards (Christmas, birthdays, even Easter Baskets often came with a $10 card in them)... And kids gift other kids at birthday parties with them, too.
So yes, I have let them buy add ons in games. They've actually only asked a smattering of times. I think b/c they knew that they would tire of the game quickly or something. But I wouldn't allow them to spend their allowance money on them, I don't think. I know it seems like there is no difference, but... with an iTunes card, they *have* to spend it in iTunes.... so why NOT on that accessory or inapp item? But with actual cash money, they don't have to spend it ever, and certainly not in iTunes.
So why gift them with iTunes cards? Well, they can also buy other games, or music. My kids tend to buy more music and additional games/apps, than in-app purchases.
Are these games that they play a LOT? Or just the latest hot thing that they'll be done with next week?