Fishmonger,
I need to apologize for not reading your post more carefully before replying. I've got a couple corrections to make.
From your post, I thought this was a different group with kids that you happened to meet on the pass. Now realizing this was your group, I'm sorry if my reply was too critical. I was not in your boots.
I now realize you were referring to a storm on July 12th and I was referring to a series of thunderstorms that peaked on July 20th. So your storm was probably not publicized nearly as much as the later storms. However, I assume afternoon thunderstorms were in the forecast whether the Rangers told you about them or not. Everyone needs to do their own weather check before heading out, and keep an eye on those "building clouds."
It's not clear what you mean in your post by these kids being in trouble. They look fine in this picture, and the boy's smile portrays a kid really enjoying the adventure. When dicey situations happen to me with the family, I'm usually way more nervous than my kids.
Regarding the space blanket, I've never read anything about them being a bad idea in a thunderstorm, but the general approach is to insulate yourself from the ground as much as possible. There's as much danger from current passing through the ground due to a strike nearby, as there is from a direct hit to your tent poles. If the space blanket is just on top of sleeping bags, then maybe it doesn't matter. The physics is not clear to me on this, but I'd avoid using one if I was worried about lightning.
Looking back at all this, you may or may not have done things differently. It's not easy to get an early start with kids and it's hard for anyone to turn back once you're near the top of a pass. Your main point is well taken - be prepared with adequate gear.
