What do we know about toddlers? Their verbal language & vocabulary is limited but they're learning. They explore their environment with their senses. They are very sensitive to the emotional environment we create around them. They probably imitate (more than pretend) words, actions, sounds, behavior. Their attention span for stories and learning varies from child to child depending on what we're using and what catches their attention. Some are very confident & social, some are clingy and shy. Large & small muscle coordination varies from child to child. Their ability to function and focus as individuals and a group varies. Their social skills vary.
What do we know about the Holy Spirit? He's God - one of the 3 forms of God as we know Him. God is invisible, as is the Holy Spirit. If you use a search tool to search for "Holy Spirit" in the scriptures many of the images or descriptions that God gives us aren't images a toddler will understand. Mary being overshadowed, baptized in fire (not politically correct in most places), revealer of truth, counselor ... But in Genesis we read that the spirit of God moved over the water. We'll come back to that. Do you pray for one another? Does God heal? Do children participate in and experience that side of the Holy Spirit in your faith community? Are there other points of reference your children might have for the presence of the Holy Spirit in their homes or faith community?
When Jesus came and He was baptized the Holy Spirit lighted on him like a dove. Immediately after in Mark 4:1 Jesus is led by the Spirit into the desert (to be tempted by the devil). That's a story with a visual image you might use w/toddlers. You don't have to explain everything. Just let the simplest form of story & picture stand. It's an especially good story if there is a baptism at your church and the kids can watch. Jesus was baptized and went under the water. We are baptized and go under the water. And we come up!
Back to Genesis. God's story tells us that the spirit of God (His Spirit) moved over the waters. In John, Jesus refers again to an image of spirit & wind when he says, "The wind blows wherever it pleases. You hear its sound, but you cannot tell where it comes from or where it is going. So it is with everyone born of the Spirit."(John 3:8 NIV) You can have fun with blowing, paper fans, electric fans, and wind with toddlers and preschoolers. Not because they will learn a memorable lesson but they will remember the blowing & the wind and maybe the words Holy Spirit. I don't think you need too much in the way of explanation. How much of the Spirit of God do we understand anyway? How much of the Spirit can we explain, even to a grown up? How much of God's Spirit does He explain to us? How much do we experience? But the wind and blowing is something tangible that Jesus uses and God the Father uses to help us understand a tiny bit more about Himself. Today we look to science to understand the wind and maybe we try to "understand" God that way too, but 2000 years ago, I don't think they did. I'm guessing their understanding and experience with the wind and the Spirit of God was more like that of a child.
But I have 2 challenges for you (not your kids). If you were a child watching when Jesus was baptized and saw that dove light on him and lead Him into the desert (the scriptures are clear that people saw the heavens torn open and the dove appearing in bodily form and lighting on Jesus and somehow somebody, maybe everybody, knew it was the Spirit of God), would you (Little Child) think of a white dove every time you are around Jesus and He mentions the Holy Spirit? Do a word search of "Holy Spirit" in the gospels and imagine conjuring that dove-like image if you were a child standing there listening. I'm not saying it works all the time in our grown-up way of thinking, I'm just giving you something to ponder. [Many churches and faith communities use the dove as a symbol of the Holy Spirit. If you want to have some fun see if you can find someone who can handle and bring in a real white dove! That would be a good starting point for arts & crafts, too, especially if you can make a dove with flapping wings.]
The second challenge. "The wind" & "everyone born of the Spirit". Do a word search for "wind" in the gospels and think about that picture Jesus gave his listeners of those born of His Spirit being like the wind . . . Do you think all those encounters and references in the gospels are coincidence? Somehow, I doubt it!
And then, as you're doing either or both of those two word searches take note of those moments when children or child occur like this one that seemed to appear out of "nowhere": Luke 10:21-24
. . . ponder the scriptures and see where they take you . . .