This is certainly a nice way to get kids started on the game. We could have used it years ago when I taught three of my family's children, as they used to watch me play too.
Intermediates being reduced considerably is a good idea, but I don't believe removing all of them is necessary. In my experience, it wasn't making circuits or gears that was difficult for them, but rather the belt logistics when you needed 3+ items to feed an assembler. They felt comfortable using robots after that, which was (sadly) the majority of the experience for them in vanilla.
Perhaps you could enable gears and green circuits to at least demonstrate commonly used intermediates, as they're simple to create and understand. Most other intermediates should definitely remain disabled. It started to become overwhelming once they needed 'upgraded' versions of the same thing, as the clutter in the menus started to frustrate them in trying to find things.
Cutest moments from the 7yo though:
"I painted them red!" - First time creating advanced circuits.
"I like the red ones more." - When making processing units.
As for the aforementioned logistics trouble, see if your son also has issues with larger recipes. Replacing two items in a later recipe with the green circuit would help with that, and also demonstrate the process of refinement for more useful results. It may prove to be more satisfying for him to see the process unfold, at least a small portion of it.
Experiment a little and see what works best.
I wish you and your kids all the best in making spaghetti, with many laughs and great memories to treasure. It's certainly worth it.