Here in Australia, the driest inhabited continent on earth, the use of grey water is somewhat controversial. Nobody disputes that it is a means of conserving/recycling water, but there ARE health hazards attached to it.
The following article might be of interest to you.
http://www.abc.net.au/gardening/stories/s1366316.htm
and there are many sites you could also visit:
http://www.google.com.au/search?client=firefox-a&rls=org.mozilla%3Aen-GB%3Aofficial&channel=s&hl=en&source=hp&q=gardening+australia+grey+water&meta=&btnG=Google+Search
Further research will tell you that constant use of grey water soon creates a very unhealthy soil indeed - it becomes 'sour' and can smell dreadful. You can imagine the bacteria in it that cause these things to happen!
The above article suggests that only the final rinse water be recycled - not the water you wash in.
Personally, if I had kids or pets who would play in the area, I would not want to use grey water on my lawn until it was pre-treated to make it safer to use.
Can you think of an alternative use of the area instead of a lawn, which requires a massive amount of water and upkeep? Would you consider using the entire area as a garden - using indigenous plants and groundcovers? A lot of gardeners in Australia are going this way. Presumably you have local parks where children can 'run wild'?