OP - don't overlook the fact that you open yourself up to adverse issues with the new employer if you give a good reference when its not warranted too. TBH this whole protect your butt philosophy drives me insane. Such a ridiculous politically correct, litigious world we live in.

I would be honest (but then I frequently am too honest for my own good). You would use her as a babysitter, but you weren't happy with her experience level to care for your kids on a daily basis. That's not nasty, its not dishonest and its leaving the door open for the potential new employer to look at whatever has happened between you and now and think but hey, that problem is solved now with more experience gained doing X or Y.