I DO NOT suggest using the built-in flash, as it will be too harsh. Use an external flash and bounce it off the ceiling.
Actually, Rashkae - you are right - the built-in flash will be too harsh with toddlers, especially when close-up. With my kids, it is external flash with bounce card most of the time.
But if no external flash, can try diffuser over the built-in. I haven't tried this, but think it should soften the lighting on the face.