Nothing is universally good for kids in too big quantities, but I think this approach would be less bad than any other approach to the moral panic around social media.

I would never let my kids access YouTube Kids, and I probably also wouldn't let them loose unsupervised on a kids-only internet either, but I would much prefer it to the alternative whack-a-mole approach of trying to make the actual internet a kids friendly place, which will eventually destroy online anonymity and turn a few of the biggest tech companies into de facto gatekeepers for everyone and handing them a regulatory moat the size of the Atlantic.