Electronic – Recharging NiMH cells after long period (18 months) of self discharge

LiPo is MUCH easier to manage well than NimH.
Energy densities for top capacity NimH are about the same as LiPo nowadays.
(That was written in 2012. In 2021 LiPo energy densities are now typically somewhat higher).

NimH is a relatively hard battery chemistry to manage well. Charging at low rates is not usually advised and negative voltage deflection under charge or temperature rise are the usual end-of-charge detection methods. In contrast, LiPo is charged at constant-current until a set voltage is reached and then at constant-voltage until current falls to a preset level. LiPo will accept any lower-than-maximum rate of charge if desired, and can be recharged from any state-of-charge with no special conditions. (Handling very low voltage cells is slightly more complex, but all sensible charger ICs handle this - and very low voltage should never be allowed to happen.)

The ONLY reason I would think of using NimH in your context is safety - and if it was my son, I'd consider that I could make LiPo safe enough for him to use. LiPo can "melt down" very enthusiastically with flame, BUT it is extremely rare in practice and taking quite usual precautions should allow a safe result. I would have no personal concerns over LiPo safety in a competently engineered system.

HOWEVER, NEVER use unprotected LiPo cells if you care about safety. The in-battery protection IC DOES NOT serve the same roles as the charger ICs do. The in-battery ones are just to stop people from doing stupidly dangerous things to the battery. That said, IF your charger is properly implemented, and if there is no chance of short or fire potential then most of the protection circuitry is not needed. I say "most" because, if there is e.g. a catastrophic equipment failure and e.g. a short circuit occurs, the in-cell circuitry will usually open-circuit the cell and prevent a fire.

Using the proper charger ICs should allow a very safe and reliable charger to be implemented.

You do not need gas gauging per se - just low voltage cut-out. If you can stop operation at say 3V / cell, that should be enough.

Protected cells should not cost vastly more. If they do, it MAY indicate that the cheap ones are bad ones. You can get utter junk LiIon batteries (and you'd hope to get a price advantage when buying junk :-) - if you were silly enough to buy them. There are enough reputable brand cells around that buying them probably does not cost vastly more. Ensuring that the cells are genuine is another matter. As a working position I suggest you start by assuming that anything bought from a low cost Chinese supplier is fake or out of spec and THEN try and prove otherwise. (NB: Racism? - definitely not!. It's based on experience - many visits to China and time in factories, etc. China is very, very large and has a vast range of sellers in a very competitive market place. In a casual sale, expect a certain portion of the sellers to be 'dodgy' at best.)

Added:

I was going to come back and mention LiFePO4 - AndreKr beat me to it.

Compared to LiPo, LiFePO4 (Lithium Ferro Phosphate) are safer, longer life and have lower energy density. You can buy RCR123A LiFePO4 batteries with 450 mAh x 3.2V capacity. (Some claim up to about 700 mAh but are suspect.) Tenergy LiFePO4 RC123A are widely advertised on ebay and should be good. Tenergy are AFAIK a "rebadger" BUT seem to sell good product. LiFePO4 MUST be charged properly, but are as easy as LiPo to manage. A very simple charger can be built using a constant-current regulator followed by a 3.6V constant-voltage regulator. This setup charges at constant current until Vlimit is reached, and then at constant V. Setting to 3.5V is better.

Here is a randomly found seller of Tenergy LiFePO4 RCR123A batteries. They also sell chargers. NOTE:
Do NOT use Lithium Ion RC123 (3.6V nominal).
Do not use 3.0V Lithium Primary RC123.

The terms RC123, RC123A, RCR123, RCR123A etc are used somewhat interchangeably by sellers. Just be sure of what you are getting.

Ideally, you would use a charger that independently charges each cell (the Lacrosse BC series chargers comes to mind).

If you want to balance the voltages of multiple charged cells, you could easily place them in parallel with each other. Ideally, they will all have roughly the same V & charge before you put them in parallel with each other.

Ideally, you'd have a recharging device that has a built-in balancing optional capability. In that case you would just leave the cells in the charger & start the balancing option & it would indicate when the cell balancing is finished.

If you do not have a charger with a balancing option, you could build your own parallel setup by using individual battery holders that each have red & black wires. You would connect all of red wires together & all of the black wires together (do NOT make a connection between any of the red wires & any of the black wires or you will create an electrical short-circuit when your cells are placed into their holders). Insert your cells into the holders & your cells will self-balance after a time.

Another connectivity alternative (if you don't have individual cell holders) is to wrap aluminum foil around 2 large craft sticks (i.e. foil wrapped completely around each stick separately). Then hot glue the craft sticks to a board with the distance between the craft sticks a tight fit for your cells. After the glue dries sufficiently, insert your cells with all of the + terminals touching 1 craft stick & all of the - terminals touching the other foil wrapped craft stick. Your cells will self-balance after a time.