You can be (and will be) arrested on the spot if caught driving while suspended (at least here in Oregon). The car also gets towed immediately. This happened to me years ago while a friend was driving w/out a license, and after he was arrested, and his vehicle towed, the police officer kindly offered me a ride home.
I personally would be extremely wary of allowing my child in a vehicle with a driver who didn't have a license for this reason...though I'm sure that police and/or social services would take good care of the children until Mom could arrive. Still, that would suck.
I think it's crucial to your own case that you understand -- in most cases the courts are not going to get involved and say the parent is so dangerous that the kid shouldn't be with them. They view lousy parenting as a fact of life, and for the most part are concerned only with protecting the kids from clearly, demonstrably dangerous parenting, or absence of parenting. Watching dad get arrested -- regrettable, but not child endangerment. The fact that driving illegally demonstrates Dad's irresponsibility and sets a poor example-- yes, but many parents are irresponsible and set poor examples. The question is whether or not the kid's in immediate danger, and the court's answer is probably no.