You betcha, that'll work just fine and probably a good low cost solution for kids video.
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You are not missing much. Rear and center channel just comes through the 2 channel with the regular audio outs. The TV speakers will do a fine center for voices. I have HT now in the last 6 months, but had 2 channel since 1986 with the old laser discs and DVD. It works fine. You can still add a subwoofer if it has high output speaker terminal connections or your preamp has 2 main outputs.
Your proposed setup will work fine. You may not need to use the TV speakers as a center channel. The center channel's primary function is to anchor the dialog to the video image for off center-line viewers. If this is not a problem in your room, then just go with the two channels. Matched speakers provide a more coherent sound.
Very wise route. I have the enough amps and speakers to have a substantial HT system but refuse to divulge into a hi priced video processor and dvd. I watch a lot of news and informative shows and all of my favorite movies usually consist of a lot of dialogue. (Which requires more acting skils ). Furthermore, who needs to hear Peter Jennings in a full blown 7.1 system with a pair of mathing subs. HT is great if you can invest an entire wing of your home to while tricking it out. This way will require a six figure home improvemnt bill to your addition. I would do it if I had that much disposable income, otherwise a pool or tennis court in the yard would do. One thing to realize about HT is that you don't need to hear an accurate portrayal of an explosion, gunshot, or doors closing because you have the TV screen to portray the image of one. I hear doors open and close daily. It is an overated experience. With two channel audio we are forced to use our imaginary senses to re create something we do not visualize. This is the beauty of two channel which is the representation of what it might be like rather than what it is.