I won't comment on all points but the notion that software costs...

I won't comment on all points but the notion that software costs must be low because it is for kindergarten kids is wrong in two respects. Firstly, the age group doesn't matter, producing software that is educationally engaging is costly and far more complex than you seem to imagine. If you were correct then any dope could have a successful product in this market. Secondly, the major product, Mathletics, is principally directed at the secondary school market, not kindergarten kids.