In reply to Bingers:
Just done this for my eldests 10th birthday. We looked at Islabikes, (his mountain bike is an Islabike,) but ended up going second hand. Picked up a very good nick mens small specialized allez with a new wheel set for three hundred quid.
We belong to a cycle club which caters for kids really well. If there is one near you see if you can get a post on their message board to asking to see who may be selling, (don't wait for people to post - there are a lot of bikes out there not being used which the owner may need a little nudge to sell.) Not much use at the moment but there is a fair bit of selling going on on our club's board in the lead up to Xmas.
Otherwise look at the b'twins Decathlon sell, (I know you've said you've been in, but a lot of the kids ours ride with have them,) as I think they start at a bit over 300 for a well specked, (for the money,) bike.