Have entered both of my kids in tournaments as the younger kids, but knew they were competitive enough to compete. It really depends on what you want to get out of it. In all cases, expectations were set before hand and the tournaments were great events. Basically, there were reasons to play other than to "win", great course, great experience, good competition and finishing high wasn't the priority.
With that said, returning the next year to these tournaments as the older kids took on a different perspective and expectations adjusted(naturally).
I think it is great for the kids to play with better players than them. They learn so much from watching their peers.
I have been hesitant to send my 5yo daughter out there for tournaments. She can play 9 holes with me from about 75-90yards and probably +1/+2 golf...but she is so tiny she just doesn't hit it very far so I am worried about the distances they setup. At 100+ yards she is nearly 3 shots just to get in with drives of 50-60yards. I just don't want her getting discouraged especially since for girls its 7 and under as the lowest age range.
I checked the recent results and its anything from kids at even par to +40 so should I be worried about trying it out?