Realtime does seem the best way to go for this game.
And as you say, I suppose kids nowadays hardly play turnbased games anymore (possibly because so few tb games are left these days) and I wouldn't be surprised if they actually don't like those games.

I understand your idea of caterpillars and it is an interesting one. I'm not exactly sure though how to translate that to a game. Usually in games things are either good or bad. There is no gray area where you can have a bit of both. I'm not sure if a player will understand the concept that a few caterpillars in your flowerbeds is a good thing while they actually do damage to the flowers. Because as long as there aren't too many of them you should be okay, if fact you'll even earn points.
I have no kids myself, so I can't really tell for sure, but somehow it strikes me as too complex for children around that age. (<10)

Hey,.. theres a thought. What about making butterflies the actual goal and ignore the damage they do. This way the player only has to focus on the condition of the flowerbeds and cocoons and perhaps the state of the houses and thats it. You could then use different kinds of flowers where each specimen has its own affect on butterflies. More exotic flowers atract different exotic butterflies etc.
Perhaps you could even buy seeds used to grow the special flowers from a market of somesort.

Heh,.. I'm getting lots of ideas myself now too

But I'll leave it at this for now. I'm waiting for your thoughts first

PS. I have played Zeus a little, but I didn't like it that much. I heard the later versions Pharaoh was much nicer/better though.