My 5-yr old daughters got 2 Syma 109 helicopters for Christmas. They love them, but they're pretty hard for them to control--actually, very hard. But they're a blast for me.

My 8-yr old god-son got a big quad copter that he can control with an iPod and it has a camera (with real-time video to the iPod). It flies and hovers amazingly well. Of course is was $400+