Sounds like a worthy effort on your part and a lot of fun too. I think the key to their development is to teach sound opening principles of piece development and King safety in the opening. I suspect that the pawn pushing will not last and soon you will see the Queens coming out quickly as beginners seem to pick up the Scholar's mate early and play for it.Keep us updated on their progress ... maybe you can post some of their games. It would be interesting to see some of these games. Most beginners do not learn notation, so here is a chance to see your student's earliest thoughts.
Teaching Little Kids

You cannot expect much from starting kids. In fact it is very likely they will refuse to castle. They don't understand why it is good, nor do they have any opponents capable of punishing them. Where I come from, the 3 golden rules are step 2 material. (Pawn in centre-develop light pieces-castle) Step 1 is just the rules, so they're not actually high demands. What can help is giving examples. Take a miniature, let white castle, and pulverize the king on e8 through the centre. It may not have a huge impact but at least you would show them. Important thing is to make them play so they can move the pieces fluently. If they're not confident, they will play along the edges and not use very many pieces. There is just too much at once to see, so they make non commital moves. You will have to check when they're ready for more. It will not be directly after they learn the rules, but for most it would still be fairly quickly. (After a few months if they play regularly.)
Good luck.

My old copy of "Teach Yourself Chess" has, at the beginning of the chapter on "Principles of Opening Play", an idealised white set up shown.
Obviously, no opponent should let you do this without a struggle, but it gives a basic plan for the first few moves: move a central pawn, maybe your opponent mirrors your move, preventing you moving your other central pawn or bishop to the fourth rank, so you see which of your other fantasy moves are possible, and pick the best one, maybe one that attacks your opponent's position somehow. The first several moves of an opening like the Italian game or four knights are explained quite well by this, and it should naturally lead into simple middlegame plans (can I disrupt my opponent's centre, can I overwork any of his pieces, etc.).
I guess there are also the standard rules of thumb: develop rapidly with threats if possible, control the centre, move each piece only once, knights before bishops, don't bring the queen out too soon, castle asap, connect your rooks, etc.

teach them a few different set ups, but dont tell them the names, just have them guess why they are good and explain why, start with e4, because they are easy to understand, also make sure that you teach en passent at some point, make it fun
Teaching children it is usually best to apply the KISS (Keep It Simple Stupid) method. The beginning position in chess is the most complicated problem. It is probably better to begin with simpler chess problems in the endgame.
Teach them the basic checkmates (K+Q v K, K+R v K, K+2B K, K+B+N v K). After that teach them the winning method in K+p v K. After the pawn promotes to Q or R be sure and let them show you the winning method with K+Q v K or K+R v K, whichever they chose to promote the pawn to.
I think you get the idea going forward.

teach them basic things like knight squares (c3, f3 for white and c6, f6 for black). putting pawns on the e4 and d4 squares for white and e5 and d5 for black. I wouldn't start with openings because they will end up not playing any other things later in thier chess carrer (however It varys form person to person) i learned that the hard way. I would play scholars mate every single time before I started playing in tournys. I also would not make them focus on notations. I still am not very fast with notations myself. Just stay on the simple side for a while and don't rush them.
transpo also has some good advice on this
I've had the priveledge recently to teach 14 little inner-city kids the beginning of how to play chess. We get together at their school each Wednesday and learn the basics. They range in age from 2nd to 6th graders, but most of them are female. All come from poor backgrounds and their school lacks quality classroom instruction.
These kids are the biggest pawn pushers I've ever met. I can't blame them, they just learned how the pieces move two weeks ago. They learned notation the first week as well! However, tomorrow I would like to set up some guidelines how they should start their games. A couple of guidelines I was thinking about was 1. Move no more than three pawns in the beginning. 2. After three pawn moves, you must move a value piece. 3. Try to castle within 10 moves. What do you guys think? Too broad? Too much? Should I pick an opening and have them start with that?