Do you have a Noise Suppressor? Those are designed for spoken voice only, and everything else is noise to be removed. Lots of people have slapped it on without understanding that, and wondered what happened to their musical instruments or sound effects. In your case, maybe it's getting fooled, thinking that the kids are not "spoken voices"?
I can understand if it actually did that on purpose. They're really designed for conference meetings in terrible environments, and kids in that setting usually *are* background noise to be removed...
