I used THIS GREAT BLOG POST from Handy Home Projects as a guide. I reused the elastic band so the only real cost out of pocket was the thread I used. That's minimal.
These were my nasty old pants.
I gutted out the elastic.
Then I cut the crotch and inner leg.
Then I cut the two pieces into "kid friendly" sizes. The adult size is on the left (obviously) and the cut down size is on the right. Throw your first piece on top of the second piece and cut accordingly (for kids 7 and under, you don't have to worry about the butt side being any bigger than the front side).
You then sew the crotch (the rounded side). Flip it and then sew the inner legs back.
After you have it reassembled, you figure out your child's waist size and cut the elastic. Thrown on an extra inch for seams and growth. Sew in a "track" and then lace the elastic through it. Sew it up.
Voila! Gross old PJ pants from me turned into great little pajama pants for the kids! The easy part of these too was that since I worked from the bottom - the bottom seams were already done from the manufacturer.