On shaft size, I must correct myself, they are 5/16th shafts. Memory is slipping. I get them from a local shop along with some 3" feathers and 5/16th nocks. They are actually pretty good quality arrows which I think is important to get kids started right.
The backing is indeed to protect the back of the bow from splintering, etc. It's too fast, cheap and easy to do not to do it IMO.
I have tried a few other backings, inlcuding body repair fiberglass mat, cotton duck and rawhide. They all work great but when it comes to expense, ease of application and longevity, the paper bag wins for me. Appeals to my chea... er, frugal side.