I know some of what I'm going to say has been said already, but I kind of wanted to give my own small piece.
After finally getting to the point where I found this NPC, I was honestly really happy, since my first thought was, is this a prelude to a future piece of content?
I, for one, would be ecstatic if we could make the younger versions of the current races... Even if it ended up being some form of adoption, as others have mentioned. Since PC's can already not only get married, but own a home, it would just be another step into having that growing family, or something to that degree. Perhaps even have them in the 'minion' section so you can summon them and they follow you around, for example.
I don't see how it would hurt the lore too much overall, considering the state of things. Now, I didn't play through 1.0... But from what I've seen and pieced together, the PC's overall story is very, very vague. A younger character's story could simply be, they lost their parents to the calamity, and decided to take up a sword... As something tells me may have happened in some cases unseen. Or... Considering this is a fantasy game after all, with it's own odd time magics or alchemy, it could simply be a spell cast on the already matured character to bring them back to a past version of him/ herself.
I understand that the whole pedophile case makes this subject very... sensitive. But if there is any sort of bad conduct, then that is why others are allowed to report said players, is it not? I've noticed that the devs have done a more than decent job in trying to let players be the character they want to be. If you want to be the big and burly type, fine. be that. If you want to be the tiny, cute type. Fine, do that. Having playable beast races would be interesting, sure. We have seen plenty that are friendly, and some that could actually possibly work, even if they had to be given a different starting scene.
Having to make armor different hasn't appeared to be too much of a challenge thus far (I'm not meaning to make it sound like it's an easy job, but that's not the point I'm going for), as each race, and size, has been made to work just fine. Gear looks different depending on race and gender, and as we can see, some of the already existing items are already made to work, so we know it's possible... If not being worked on already.
I've always been someone who just likes being that smaller character in the group. I always have. I played the elin. I played the lyn. To me, being that tiny character and fighting a giant dragon (for example) solo just made it so much more enjoyable and memorable... But I would also rather play a miqo'te than a lalafell. So having a sort of happy medium would be great, I think... Especially if there are different perks, and drawbacks, to selecting the adult, or younger version, going back to what I mentioned with being allowed to be what you want to be. For example, the adults, as we have them, do not need to change. They are well rounded. But as the smaller, younger ones, perhaps they have slightly reduced base stats, so, in turn, do less damage and have less hp, but have smaller hitboxes, and slightly higher movement speed in return?
I know I would buy a Fantasia on day 1 if this was implemented.
And really, trying to bring up 'children would just get crushed by the primals.' Just as others have said, I'm going to repeat it. Lalafells. Yes, an adult lalafell would be tougher than a child one, but why would they be as strong as a roegadyn in the first place? Or, 'everything that takes place would be too traumatizing.' Most child NPCs in this game are already pretty much dealing with war, death, and what was practically a near apocalypse, also going back to when I mentioned that they could have lost their caregivers in the process.
Anyway, I don't want to rant for too much longer, but in the end, I really do, personally, hope they keep working on making the character creation more in-depth. Character heights, ages, and maybe even more ear and tail types for miqo'tes. I know much of it is going to be restricted via lore, but I at least think there's some potential in the fact that they added these younger characters to the game, and I hope more is added... Mostly in allowing them to be playable.
I seriously loved finding that NPC, and really wished there was some sort of content around her, other than her just being there. So I hope, in the near future, there actually is more to it.