How awful for you I am so sorry.
Dogs are a predatory species and sheep unfortunately are prey and your dogs were doing what comes naturally to some dogs. In your profile you say that the dogs are collie crossed with GSDs so its likely they will have a strong prey drive. Humans are generally viewed as competitors/group members rather than prey so unless they suddenly view your children as prey they should not repeat this behaviour towards your children. However, I wouldn't ever leave small children unattended with ANY dog.
It is understandable that your children would be afraid and I strongly suggest that if you wish to keep the dogs that you seek the advice from a fully qualified pet behaviourist in your area. Your vet should have contact details. However, please make sure that the behaviourist is qualified see www.apbc.org (if in the UK or the equivalent in the USA). The wrong type of training in this instance could be disastrous. It will take time for you to trust the dogs again and this is quite natural but try and remain calm and react normally towards them as they really won't know what they have done wrong after the event. They will know something’s wrong but not what exactly. Some trainers might suggest that you use aversion therapy or shock collars to stop your dogs chasing and killing sheep but this is always fraught with difficulty and may lead to increased aggression in the dogs as they may not really understand why they are being punished. If you are going to keep sheep, don't keep dogs and vice versa unless it’s a very small dog that has brought up with them. We have to think about the welfare of the animals here, would your dogs have a good quality of life if they were always around sheep as they may become quite frustrated that they couldn’t get to them and that they were continually being punished for doing what comes naturally and would the sheep be happy knowing that there were two dogs wanting to eat them around?
The children will also have been traumatised and will need to learn to trust the dogs again slowly so it’s important that you react calmly and seek help with this.
It is always a harrowing experience and why farmers will shoot dogs if they start to attack the sheep. The fact they have actually killed the sheep means that they do show that uninhibited killing behaviour and they may not stop at sheep, the hens etc may also be killed. It’s a difficult decision for you to make and I am sure talking it over with someone qualified will help enormously.
Good luck and best wishes
Rosie Barclay