I did a similar thing with 7 year olds, and we did VERY challenging material, and songs from shows such as SWEET CHARITY, INTO THE WOODS, SPAMALOT, LITTLE SHOP OF HORRORS, NINE, OLIVER, etc.
All of that material is extremely difficult for 7 year olds- none of which could read the music, and some of them couldn't evevn read yet. We believed in them and pushed them - and in 3 weeks, they had every difficult, fast paced word to "You Can't Stop the Beat" down and amazed us and their parents. If you teach them right and show them that you believe in them (although that;s easier with middle schoolers,) children are capable of anything.
My kids always LOVED singing and dancing to:
"It's the Hard Knock Life: from ANNIE
"Be Back Soon" (in a round) from OLIVER!
"Welcome to the 60's" and "YCSTB" from HAIRSPRAY
and after 5 years of teaching little kids, their all time favorite song to sing and dance to was "Hair" from, obviously, HAIR. They were fantastic. Challenge them!
"If you are going to do something, do it well. And leave something witchy."
-Charlie Manson