My son has been racing for about 4 years now. He is now 9, and getting hungry for speed!!
When I built his car, I put an OLD motor in it that ran well, but didn't have much speed to begin with. I think it was an old P2K. I geared him down about 6-8 teeth (48 pitch) from what everybody else geared and then adjusted the EPA on his throttle to about 75%.
I also set his car up VERY soft so that it handled kind of lazy, but with the slower speeds, it didn't feel bad at all.
Now he is running 100% throttle, but I keep him geared down a bit. His car is set up almost exactly like mine so that he has the correct feel to the car.
The biggest problem to solve is getting him to NOT RACE!!! I just want him to drive and improve, but he gets caught up in the competition and races too hard and hits stuff. When he is alone on the track, he does very well, but as soon as he sees another car, he starts cutting tighter corners and eventually hitting a bunch of them.
Just get him racing, and do your best to keep it fun.