My youngest son got a Butterfly Pavilion for Christmas. (Butterfly Pavilion is from a company called Insect Lore.) In the final weeks of winter, we sent away for our caterpillars and let the fun begin. The caterpillars arrived in late March and spent only a few weeks with us. My son documented the changes in a little booklet we made.
We originally labeled the pages in his book by weeks, but each change for our butterflies took a little less than a week, which was fantastic for holding the interest of a five-year-old.
Once they turned into butterflies, we only kept them inside for a few days, picking fresh flowers for them daily (dandelions and grape hyacinth, mostly).
When the daytime temperatures were consistently comfortable, we released the butterflies into the garden. The butterflies didn't want to leave at first, which allowed the kids time to hold them. This was an easy project we will probably do again next year.