I have some recycled, shredded rubber stepping stones and I love them. But there are some drawbacks to the rubber:
* Rubber mulch may contain harmful substances. Several organizations claim it contains potentially harmful levels of zinc (can harm plants and gradually build to toxic levels in the ground) and aromatic hydrocarbons (think air pollution). Some cheaper rubber mulch may contain bits of wire from the radial car tires that get shredded.
* Rubber mulch absorbs heat from the sun. On a hot summer day, the mulch can become uncomfortably hot for children and pets.
* In hot, sunny weather, rubber mulch gives off an an unpleasant, oily smell. This may not be safe to inhale. (I get sick headaches even when I walk into a place that sells new tires.)
* Colored rubber mulch can leave colors on kids' clothes. Some manufacturers don't use top-quality dye, so the colors can run, especially in warm weather. And the colors tend to look harsh and artificial.
* In very cold weather, rubber mulch loses its shock absorbing qualities and doesn't offer the same protection as in warmer weather.
* Rubber mulch blows away more easily than woodchips. A strong wind can send rubber bits flying outside the playground.
Wood chips or bark mulch are more environmentally sound. They will need to be topped off with fresh mulch every 2-5 years. If you go with wood mulch, be sure to ask which types in your area are less likely to splinter or cause injury. (Here on the west coast, hemlock mulch is nice to handle, while other types leave tiny slivers or have sharp edges.)
Pea gravel is aesthetically pleasing, is fairly safe to fall on, and holds up well, but it does sometimes find its way into loose-fitting shoes. Either wood mulch or pea gravel would be my preferred choices.
Google "is rubber mulch safe for kids" for a variety of views before you decide.