Ok lets clear up a few things here.
The idea of cutting weight has several reasons as to why it is done. In several years past the reason why some wrestlers cut weight was to find a varsity spot where they could win challenge matches and compete. If you are on a team where the Varsity wrestler in your natural weight class is a 3 time state champion, it makes sense for you to cut 5-10 pounds down to the next weight and challenge the guy there that might not be as good.
However over time the idea of weight cutting was that you would be more "competitive" or be in better shape if you cut some fat and water weight off. Whether or not this is true is a big subject of debate. If you are truly a good wrestler you don't need to cut weight to be sucessfull. The only otehr time I see this being a problem if you are the type of wrestler who pigs out on food when wrestling season in not on.
I don't personally believe that werstlers in Kids wrestling, up to the 14 & U, age group ever need to cut weight. 14 & U kids usually fall into the middle school, high school range where they are fighting for spots on the varsity team. However if you are kid wrestling in kids wrestling there really isn't a need for it. Some parents of the younger kids are giving the sport a bad image by dieting their kids because they think going down 3 pounds is going to give them a huge advantage. I think you will find that if a kid is truely tough, he will do well at his natural weight.
Bottom line here is:
If your kids are 12 years old or younger, DON'T make them try to cut weight, because you are doing them a huge disfavor. When they get to 13, 14 or older let them decide if they want to cut a few pounds or not.