Hi,
Im studying to be a high school drama teacher, but have done quite a bit of work with elementary aged students, teaching outside of schools.
Drama can be great to teach to all the students because it is something that encourages creativity, self exploration and increases self confidence and body awareness. The fact that it can all be taught through games makes it highly interesting and engaging for all students, and they have the opportunity to be working at all levels. It also gives the students important skills that they can and will use throughout their lives - such as public speaking, communication skills and use of body language.
I think that if you are doing a school play you should audition, but give a few years the opprtunity:
The lower years (1-3)could put on a short skit night for their parents - get up and tell a story, or read a poem, or act out a short scene, etc.
The middle years (4-5) could put on a short drama.
The upper years (6-7) could put on a one act musical.
This way, everyone feels some measure of pride and success, but also can feel as though they can make progress throught the years and the development of their skills.
Hope I've given some good ideas

Erin