My kids love to felt and have all pricked themselves. First it was a HUGE deal, and now I hear "ouch. oh well" and they continue on. What you *really* need to be careful about is getting them to put the needle in a safe place when they are done. They are not using that much force when they are felting (or should not be) to do that much damage, but a felting needle through the foot could be serious.
My kids are 5. 7 and 9 too, so younger ones can handle it. Just make sure to do one needle at a time and make sure it gets back to its home.