Yes, much too small. Kneeboarding is fantastic fun and incredibly easy to learn and you can take it as far as you want in terms of learning tricks, spins, jumps, flips etc.
You should be OK behind your SIB but might struggle a little if they are big kids. I use my 3.4m/9.8 with my 10 yr kneeboarding but he is small.
9.9hp enough to tow...?
As for rope length forget a standard 75ft rope - cannot remember what we use (perhaps 30 - 40ft) but you want them closer than 75ft, no wake to speak of on a SIB either.
Just pick up a cheap old style big buoyant kneeboard on eBay to start with and go from there.