Q: In a catechetical setting, is it permissible for the catechist to bless the children, even tracing a small cross on the child’s forehead?
A: I say yes. The USCCB now has a second edition of its book Catholic Household Blessings and Prayers. On page 189 you can find Prayers for Children. At the conclusion of the prayer the adults “may trace the sign of the cross on each child’s forehead.”
It would not be appropriate for the catechist to bless the child in the manner of an ordained minister, using the entire hand to trace the sign of the cross over a child or group. But tracing the cross on the forehead of a child, which parents and godparents do in the Rite of Baptism for Children, is perfectly acceptable.