I spent some time fiddling around with assembly when I was a teenager to run a TSR (terminate and stay resident, what daemons were called before they were daemons). It would hijack the screen when my little sister was playing a computer game and type out spooky messages like "Help me Sarah... I'm trapped in here" and then go back to the game after a few seconds as if nothing had happened.
Ah, how we laughed (after her nightmares stopped)...
The Pi is $35 and has HDMI out and lots of USB ports. It's pretty great.
What software do you have running on the Pi for your 3.5-year-old?
A colleague of mine had a lot of success with Edubuntu. [2] Her six-year-old is a whiz at the command line. Again with the keyboard use, so not quite appropriate.
I'm still looking, basically. He likes clicking around and seeing that he's having an effect on things, but he usually ends up at YouTube, which isn't so great.
[1]: kano.me