Translation:It is already eight; it is time for your kids to go to school.
"It's already eight; it's time for your children to be in school" marked incorrect; since there's no verb of going (unlike in "Моим родителям пора идти на работу", which is also in this lesson and does have a verb of going) and the preposition is "в" not "к" - is it actually incorrect, and if so why?
В + accusative (в шко́лу) expresses the destination (literally 'into school'), so going is implied.
To express location, you need to use «в» + prepositional case: «в школе»: «Твои́м де́тям пора́ быть в шко́ле» 'It's time for your children to be in school.' But it sounds very weird with «быть» omited, you probably can’t omit «быть» here.
By the way, it has just occured to me that this sentence could refer to the kids' age: i.e. someone has twins or adopted kids of the same age, they're 8 already and it's time for them to start going to school.
Children start going to school at the age of 6 or 7, so this sentence wouldn’t probably be used with this meaning around here, but theoretically it could have such a meaning.
"it is time your children went to school" was rejected. It sounded normal to me so I looked it up:
from Practical English Usage, p. 286.
306 it's time
1 followed by infinitive: "It's time" or "it is time" can be followed by an infinitive.
It's time to buy a new car.
To say who should do something, we use for + object + infinitive (see 291). It's time for her to go to bed.
2 followed by past tense with present meaning: "It's time" can also be followed by a subject with a past tense verb. The meaning is present.
It's time she went to bed. It's time you washed those trousers. I'm getting tired. It's time we went home.
The expression "It's high time ..." is often used in this structure in British English, to say that something is urgent. It's high time you got a job.