I've not used any Netnanny software myself, but I have a number of suggestions.
Firstly (and I don't do this myself !) give them each a non-admin account and password your own admin account. At least that way they can't install programs or chuck stuff in the Windows directory.
Have you tried IE's own content advisor. If they are computer savvy they may be able to get around this, but worth a look.
Depending on how paranoid you are, the IE history/cookies will show you where they've been, but it can be cleared (sign of a guiltty conscience
). I'm sure there are tools out there that will format/report on these.
Having found a 'dodgy' java class on my system recently, I now do a quick AV scan of 'Documents & Settings' and Windows every morning.
If it's XP Pro you can use the 'Local Security Policy' in 'Admin Tools' to lockdown the system even further, but prob a bit ott for a home system.
HTH