sometimes my kids would pick up the masrooms and sometimes (more often) they won't.

i drop them down next to the mashroom for as long as the mushroom disappears.

why won't they pick it up??

Check to make sure that you have v1.01 of Virtual Villagers (look in the lower left corner of the Menu screen). That version corrects a bug related to mushroom picking. If you need information about getting v1.01, check this thread.