I totally agree that pet stores are to be avoided at all costs. Also, if $700 is too much for a puppy, they need to be sure they can afford food, vet bills, etc. That said, I think getting a puppy is an ideal way to teach kids about being responsible and caring for something. I don't understand why so many rescues won't adopt out to responsible families with children. We were turned down by rescue b/c we have a child and I know we provide great homes for our dogs and I think it's nice for children to grow up with a dog. There are a lot of puppies on Petfinder though competition can be stiff. She could also check with shelters and be put on a waiting list if they approve the family.
It is a LOT of work to have a puppy and children (we have an 8 month old baby) but if your friend is up for it, I'd say go for it. Just be sure to remind her that puppies bite and chase and jump, etc. so if her children are nervous in any way about dogs, an older one might be better. Beagles/mixes and retreivers/mixes come to my mind as good first time, "kid friendly" dogs. Good luck to your friend!