I bought my son a Majesto V in school bus yellow. Doesnt sound that bad when you can keep it in tune. He doesnt play it much but then again he's only 4. He will plug into his amp from time to time and jam along with me though.

Ive thought if I was to get him another if he took more of a intrest Id look into a ministrat.
http://guitars.musiciansfriend.com/p...tar?sku=510421

If you want a acoustic how about......
http://guitars.musiciansfriend.com/p...tar?sku=515880
Little more money but its not just a beginner its a traveler.