Definitely very sad news, and I hope she recovers without any further problems.
My best friend's daughter wanted to build a staff to accessorize a costume a couple of years ago. Fortunately, she was an excellent student and very meticulous, and followed all the safety precautions. I let her use the band saw, power sander, and hand tools. However, I did all the cutting on the table saw and routing. Not that you can't cut yourself on a band saw or take some skin off with a sander, but the extent of the damage is likely to be much smaller. As for her younger brother - I'd let him use a rasp and sandpaper. Well, maybe just sandpaper. 220 grit and finer.
As for liability, let's be careful and not get off track on legislation, lawsuits and insurance. But one thing to keep in mind is that a good woodworker is not necessarily a good teacher. We should definitely be hesitant in bringing a novice into the shop, no matter how confident we are in our own skill. We've learned what works and doesn't work and what to watch out for, and expanded on what we're comfortable doing (ripping larger boards, routing smaller pieces, etc.). But a student will often assume that this is "normal" and copy what you do. It is also difficult to expect what someone will do. My mother-in-law wanted to help with a project once. I was ripping a board, and while the blade was still spinning, she reached over the blade for the off-cut. My heart nearly stopped. Nothing happened, but that's when you realize one false move can spell disaster. If something had gone wrong that day, I would have been responsible, even if I didn't make the mistake.
Will I help someone with a project? Definitely. But as for how much they get to do themselves largely depends on how much I think I can trust them. Trust is earned. And before turning on any tool in the shop, I will walk them through the safety steps, explain what can go wrong, what to expect etc. And not just the first day, but EVERY day. There is a reason Norm repeated his safety warnings every show. Even if I'm the one actually using the tool, I will still provide instructions. You do not want to joint an 8ft board and have your student "help" you by grabbing the board as it extends beyond the outfeed table. If they even lift it slightly it'll slam into the cutterhead.