My thought on a project that could be used for pupils 8/9 years and older with varying complexity.
Start off making a traffic light controller, just 3 LED's of the appropriate colour required.
Enhance to two way or greater intersection.
Add a sensor of choice to detect pedestrians and provide a times crossing with pedestrian indicators.
Get two or more Pi's to talk to each other either via network or wireless dongle and implement a LAN multi junction control.
Alter program to account for the UK's (I believe only the UK has the extra phase sequence) for non UK countries - remove the extra phase for UK people to represent other country lights.
This could be extended to signalling for train enthusists.
For secondary schools standard temperature contol projects (how hot is my Bunsen burner, what is the PH of the concoction that just disintegrated Herberts blazer (ahh memories), different ways of measuring flow rates ? I assume they are still allowed in schools) and (I love 1-Wire devices), security and cashless systems using iButtons or similar.
I can feel a magazine article coming on!