I saw the show on opening night (my review is linked in the other thread), and although I don't think it was the best show I've seen at the Muny this year, and especially in the past 4 years (since Mike Isaacson took over as Executive Director and everything go noticeably better), I enjoyed it a lot. It's not a groundbreaking production, but I don't expect those at the Muny. Aside from a few relatively minor timing issues (that I mentioned in my review), I thought it was good.
As for the children, there were about 12 to 15 kids, I think, and they were sitting onstage at the beginning. Ken Page (as the Narrator) starts telling the story to them, then they all put their black robes on and leave the stage as the Prologue starts. Then throughout the show they served basically as stagehands helping with scene changes, and they also were the birds. Their coming back on stage at the end was, I thought, a carry over from the first scene. The story is being told to them. It was a somewhat thin framing device, but the Muny always seems to want to use its kids ensemble as much as they can, and this seemed to work well enough, at least for me.
As for the costumes, I thought they were fine. They weren't spectacular, but they were fine, and like with a lot of the Muny's video clips, they looked a lot better live than in the video. The set was excellent, I thought.
As for paraphrased lines, I am most familiar with the OBC version of the show (had it practically memorized at one point), so any changes I heard, I assumed had been made for the revivals. I didn't assume the actors were making them up.
It was a good show, I think, at least on the night I saw it. Rob McClure and Elena Shaddow were, I thought, the most impressive performance-wise, and Sara Kapner was about perfect as Little Red Riding Hood. I liked Heather Headley as the Witch as well. Her voice is excellent, and I thought she portrayed her possessiveness toward Rapunzel especially well. I did notice that her makeup didn't change when she transformed, but I didn't mention that in my review because the transformation would be a spoiler.
The Muny is well-known, but as someone who sees many shows in St. Louis every year, I would hardly call it representative of the St. Louis theatre scene. The Muny has to be more broad appeal simply because of its nature. It's huge, and it draws audiences made up largely of people who aren't regular theatregoers. For good or ill, they know what works and they do that. Still, the quality has improved a great deal in the last few years as I mentioned before. There are other, much smaller theatre companies in St. Louis that are doing some great work. I wouldn't judge all of St. Louis theatre by the Muny. Love it or hate it, there's only one Muny.