I have a three year old who's very curious and fairly intellectually mature for his age, and in the recent past has been very intrigued by story telling that felt very reminiscent of role playing: I would make up stories with him and Curious George doing things together, and he would occasionally jump in and make decisions (either prompted, or often unprompted - he would excitedly decide we were buying Lasagna for dinner, for example, when we got to the store.)
I began designing a simple RPG system for him tonight, and realized I had some trouble determining what would be a good way to give it some 'difficulty'. I set him up as a monkey with the option of [Strong | Fast | Curious], with the Man with the [color] Hat (and color similarly was tied to those attributes]. We then went into a Museum, and wandered through Rooms with Pirate Treasure in them, each room having some challenge to overcome. Except I couldn't really figure out how to tailor 'challenges' that might not be overcome; he's smart, but not necessarily smart enough to solve riddles/etc. yet, which is all I could really think of.
In my test run I gave him a few opportunities for multiple choice options - he had a Strong monkey and a Fast man with the purple hat, and I tried to give him solutions to puzzles where either Strong or Fast works but not the other. That didn't work too well, but it's early days yet, and he is undoubtedly still figuring things out himself. We also did a Monte Hall type scenario with three caves, two of which had bears and one had a coin; each time I asked him to have one character go in and run away or fight the bear based on their skillset. He figured it out eventually, but it took some time and explaining.
What would be a good way to make challenges that are difficult without hitting a three year old's frustration level? Are there elements in other RPGs (I'm only familiar with D&D, basically) that would be well suited for this kind of game - something that he would feel happy to overcome but would have an idea that it was difficult? Ideally I'm looking for something from previous experience with children, or with adults that might translate to young children. I would also accept pre-existing products (storytelling type games or similar) that are aimed at 3-5 years old, that are easily adaptable to the kinds of stories my son would be interested in, and include some 'difficulty' mechanics (so there is a game element that is not a 100% success, and not solely storytelling).
Just to be clear, I'm not looking to turn him into a D&Der explicitly (like the linked "How do I foster enjoyment..." question implies, for example); I'm happy for him to do so or not as his personality develops. I'm looking specifically to tailor a storytelling-type game for him, at this age, that will keep him interested for a half hour or so and start to teach 'game' concepts (ie, winning and losing, challenging/difficult things). I think I have the storytelling down, but adding the game concepts is the problem.