Whilst the Skipper is responsible, the parents are responsible for the child's behaviour you can usurp their authority by throwing all misbehaved children overboard, and and should be wised up to that before setting out.
In my experience, most kids are fine, even 3 year olds. Put the life jacket on them and then ask them to steer the boat, whilst keeping an eye on them and showing them what to do. Do this as soon as possible after leaving the mooring under motor, when there is nothing to hit and they'll soon tire of it and either want to sit and play ipad games or if they've been brought up properly, as in not had an ipad babysitter, they may be interested to see the scenery, or go below and sleep.
The more you worry about how bad it will be, the worse it will be. Tell them how much fun they're going to have, make sure you chuck 'em over the side at a nice spot and they'll remember it for at least two weeks! Go to Refuge and row ashore to the sandy bit and go for a walk up the creek. If you're in the harbour, park near the zoo, or go around to Balmoral for a swim.
Make sure they go to the dunny before getting on the boat, and show 'em how much fun it is to pee over the side. Give 'em a fishing line when you're at lunch and put some chicken on it, they probably won't catch anything, but they'll have fun doing it and tangling the line.
Just don't worry, you will be fine. I've had a 4 and 8 year old in the harbour in a 30 knot westerly trying to see a whale between North and South Head, while trying to take a second reef in a 2 metre swell....... How hard can it be?
