Annual Smithsonian Folklife Festival is held on the National Mall the last weekend of June and the 4th of July weekend. There's a full range of children and family activities ranging from hands-on activities, games, workshops and interactive presentations which explore sustainability, music and culture.
I've attended this free festival several times and would recommend it to anyone. If you like to try different foods - there's ample opportunity at this event. Every time I've gone I've tried some new cuisine and enjoyed great performances. You should add this event to your calendar if you're in the DC area when it takes place.
This festival was a wonderful change form the museums and monuments. There were a bunch of kid activities and plenty of kid friendly demonstrations (music/dance). It is located right in the middle of the National Mall close to the Smtihsonian museums.
This festival is held each year outside on the National Mall in DC. It is free and features different cultures/cities/countries each year. Check the festival website for exact dates but it is usually held the last week of June and the first week of July. It can be very hot and humid in DC that time of year so bring lots of water and be prepared to walk and sweat. There are lots of interactive activities for kids to see and do. There is always music, dance, and regional food (to buy). The festival performances run all day and there are additonal concerts/presentations in the evening. This year they are featuring African American oral tradition, music from las Americas, and Welch culture and heritage. It is worth planning a trip around this event (I think). I wish we were going this summer!