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.”