I would recommend the Nintendo DS for each. I worked in at a day camp this past summer where the kids were allowed to bring their electronics for free time. They were responsible for keeping up with them. 99% of the kids who brought an electronic brought a DS. There were a couple of kids who also had a Game Boy or the PSP. The PSP is expensive. And you can play Game Boy games in the DS.
As was stated in another response, the DS allows the kids to enter the same game together. They would get them real close together and it would download. There is a way for the game to download into another DS and that child can play without actually having the game in their system.
They can also chat. However, we had some problem with this because I had some "mean girls" in my group (8 and 9 year olds) who used the chat room to talk about people.
We got my son, who is 6, one this fall. He loves it for long trips. Between the DS and the portable DVD player, he could ride for days in the car and be happy! He really doesn't play it much at the house. Right now, he is into playing games on the computer.
Miraculously, none of the kids at the camp actually lost (or broke) their DS for any length of time. We had a few lost styluses, but those are easy to replace. Our biggest problem with them was the kids wanted to bring their chargers to re-charge them. They were suppose to do that at night. And, I did have some trouble with kids not wanting to turn them off when we would line up and walk different places. A few times of them being banned for the remainder of the day solved that problem!