[Dear Reader: if you haven't yet tried Amazing Tales and have the chance to do so with children, please do. It's really awesome. Absolutely my go-to for introducing kids to RPGs.]
I ran into a situation like this when playing Amazing Tales a couple of years back with my three kids. Basically, it was an argument about whether or not we should wake the tiger that was plopped in front of the gate to the princess's garden...
We went ahead and played it out both ways, and then chose which we liked better. We played until the next player skill-roll would have been called for; it created a natural "cliffhanger" moment to break off and consider the other timeline. When the second timeline got to its next skill-roll, we paused a sec to decide which thread was real and which was just their characters imagining "what if we...?"
I was surprised that the youngest — then five or six — grokked the notion of "alternate timelines," but it wasn't a problem at all. "Let's see what happens if we do, let's see what happens if we don't, let's choose which we liked better."
I don't know if that's going to translate down to a three year-old as well as it did here, but give it another year or two and I'm sure it will.
