Pellets are cleaner than flakes. I use the floating pellets for my pond. they come in a wide variety of sizes. Drs. Foster & Smith sells Azoo floating pellets baby size that would be just fine for him. My sister just got some for her shubunkin and goldfish fry that are between 1 inch and 3 inches. They don't have any problems with that size. The pellets float long enough for the fish to find and eat them. They stay floating so if the fish does not eat them, you can take it out and set it on a napkin to dry and feed it the next day so there is no leftover food in the tank. I would feed 1 pellet at a time. Goldfish will even learn to take the pellet right out of your fingers.
The 20 gallon would be the smallest size I would suggest. If you can talk them into a larger tank, that would be better. If not, then go with the 20 gallon long rather than the 20 gallon tall. That way the fish will have more room to swim side to side. Since you would need to upgrade the filter, you may want to price the components separately. If you put gravel in the bottom, make sure it is large enough that the goldie cannot get any stuck in his mouth. I don't use substrate in my pond, it is just a
bare bottom pond. The bare bottom also makes it easier to keep the tank clean. The good bacteria will grow in the filter media and on the surface of things in the water. You could put some larger rocks placed around to anchor some fake plants. Live plants may get eaten. An air pump is also important. My absolute essential list would include:
tank
filter
air pump
rock for decoration and to anchor airstones
fake plants/decor
pellet food
tank vac
Here is a pic of my sister's fry - they were in my 40 gallon breeder tank for about a week until she got her outdoor pool set up for the fry. She has a couple of young lilies anchored under some rock and brick. Other than that, there was nothing else in the tank but a hang-on-back filter and a bubble wand across the back. She was getting so many more eggs, that she bought a large blow-up swimming pool and has it set up in her back yard for all the fry.
Anyway, the bottom does not have to have substrate and I think it is easier to vacuum up the poop when it can't hide in the gravel...
All things Goldfish. Also check out the Goldfish Profile for care information and the Goldfish for Beginners article.
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. I want to try to explain to them how to properly care for the fish, so I was thinking that I could make a list of things to get/to do for the fish. What would be a good kit for them to get? Would the Tetra or Aqueon Deluxe 20 gallon kits be good? What supplies do they need? Are goldfish flakes ok? 
