Definately be open and honest as much as possible.
My mum dropped the bombshell that she adopted out a child when we were teenagers. It was a shock and we have no relationship with our step sister at all. TBH, looking back now on things my mum did and said as a parent and as her own person, it all makes sense about the child she adopted out.
I like the idea of the momentos and album for the child, they may be able to relate better. I am sure there would be books that could help on the subject?