Starting school chess club - skill levels?

I have volunteered to start a weekly chess club at our school, probably for 8-12 year olds. It is very likely that some of them play already and are reasonably skilled, but others will be weaker and need instruction on rules, basic tactics and strategy. I want students to have fun, but also be motivated to improve and challenge themselves. I'm wondering what advice people have about the following:

a) Determining students' skill level initially. Just pair students up randomly, and see who wins and loses? Is there a better or more systematic way to do this?

b) Whether it is a good idea to have some kind of rating system as the club gets going. Do people recommend using a chess ladder, for example? Are there risks with weaker players that are constantly at the "bottom" of the ladder? Is there a way to reward strong play without discouraging students who are just learning?

Thanks for any advice on this.

You definitely will want to go to www.ChessKid.com; it's our sister site for kids :)

This is a great place to get advice on teaching, but ChessKid will be much better suited for your students and learning!