to repost your request in the Digital Camera forum.
However, I am not sure that what you are looking for is available. All digital cameras will have the ability to upload their photos to a computer via a USB connection, and so what you ask is, I think, software to handle and edit those photos when loaded onto the computer.
There are many image editors available. Windows has it's own called MSPaint, found in Start > All Programs > Accessories, and this is ideal for simple image editing. But image editing to the level you are talking of, making stories, adding funny faces, sending email, etc is an involved business requiring knowledge of more than one discipline, and I fear this may be too much for a young child to master.
So, instead of the Digital Camera forum, perhaps a repost in the Computer Help forum may be better.
Good luck.
Mark
My daughter id 6 and is getting a digital camera for christmas. After a bit of research I decided to get her a real camera for the same price that a kids one costs (like the fisher price or vtech camera). I would however like to get hold of some software that would be fun for her to play with her photo's and possibly make stories with them and add funny faces, email etc. Does anyone know where I can download some software like this. Free download would be good but am happy to pay if I think it's worth it. Downloading would be easier than purchasing in store because I'm in Australia. Thanks in advance
Kelly.

Chowhound
Comic Vine
GameFAQs
GameSpot
Giant Bomb
TechRepublic