Well, from what I can tell, it's actually easier than you think! I've always tried little braids and pigtails for my daughter, but since we're not endowed with much hair in this family, it doesn't work so well.
I believe it was in one of Liz Clark's many documents on dressing children that she mentioned just parting the hair down the middle and slicking it down, cut short.
I was looking through Earthly Angels for some new toddler dress ideas and noticed so many of the girls wear their hair this way.
An example from the site: