Where's your evidence that "kids love it"? Also I'm pretty sure I remember reading even kids hated jar jar. And I've never seen a single toy around today. In fact when I look it's either the OT or EP7.Hardly. Kids love the prequel trilogy.
Personally, I think Episode 1 was okay, and 2 and 3 terrible, but there are loads of kids that love them, and contrary to what a lot of adults believe, kids don't just love any old crap.
Lucas achieved *almost* everything he set out to do with the prequel trilogy. He revolutionized film making. Forced cinemas to convert to digital projectors. Made a movie kids loved...
He just failed to make movies adults loved. Myself included in that group.
But the 'lol he is out of touch with children' line is so far from the mark, given how kids feel about the prequel trilogy (and the clone wars TV show).