Although not technically family, a very very close friend of mine has three children, ages 2, 4, and 8. The two year old has been more or less oblivious to my transition. I think he actually thinks I'm two separate people, because he always uses the correct name for whatever role I happen to be presenting as at that time - something NO ONE else has yet to do.
With the other two, her parents and I have found each requires a very different approach. With the 4 year old we've discovered the best approach is to leave it dangling as the elephant in the room until she mentions it, and then we patiently answer her questions. And she does ask very pointed questions. But they're so random and completely out of the blue it makes her seem extra cute and hilarious. For example, one night I had been reading a story to her for about an hour, and she hadn't mentioned my transition at all that night, so we all thought she had finally understood what was happening, but, she abruptly turned to me and said "You look like you have boobies. Why do you have boobies?" But, pointed questions aside, which sometimes need to be patiently answered more than once, she seems to pretty much be rolling with the transition. I guess really she doesn't think it effects her at all, so she doesn't really care, but, she is still curious.
The 8 year old, however. She's having the hardest time with it. She doesn't understand it, at all, and as shes old enough to have a grasp of binary gender it kind of totally effects her worldview that I'm blurring those black and whites into a grey. And we've sat her down and explained it to her multiple times. And, she tries to be polite and accepting. But, it's very very clear she simply does not understand why I'm transitioning and only understands that it's happening. So, I dunno. The only thing that can be done is show her patience. She'll either come to understand, or she wont. She is, afterall, only 8. And the concept of fluidity of gender is a very difficult concept to grasp when you've only barely begun to grasp the concept of gender period. Honestly, what I feel would be the biggest help for her would be if I could explain to her WHY I'm transitioning. But, I can barely explain it to adults in a way that remotely makes any sense. I have no idea how to explain it in terms an 8 year old can understand.