I know you've already gotten lots of great advice, but I just couldn't pass up giving my 2 cents. I am a photographer specializing in children's portraiture, so I get this question from my clients a lot. Here's what I tell them: simple solids are best. Everyone does not have to wear the same color, just be sure everyone is wearing the same tone (light, medium, or dark), and avoid colors that will clash with colors others are wearing. Usually, I suggest keeping clothing casual; they are children, after all, and should be in their everyday clothes so they can be comfortable fully express themselves. But since you are doing a little more formal "tea party" style session, "dressy" dresses will be perfect. Just avoid plaids or checks and flower patterns; these distract from what should be the focus, your children's faces.
A few important things for you as a parent to remember during your child's session: Relax, and don't try to take control of the session! Don't ever tell your child to "say cheese" because this will produce the most unnatural smile ever. In fact, keep some distance between yourself and the session and just sit back and watch. If your photographer's style is anything like mine, they will talk with the children and and will have their own "tricks" to get natural smiles. The photographer will let you know if they need your assistance.
Most important: just enjoy the experience of watching your children as they are photographed. The experience is so important to the final product, and someday you'll look back on the day itself with fond memories.
Good luck, and let us know how it all goes!