As kids we use to launch bottles with some pretty sketchy homemade PVC pipe systems. While the homemade systems worked, I was always amazed we never got injured.
If I wanted my kids to play with something similar I would buy the AquaPod Bottle Launcher. Not because I am lazy, but because it is engineered with a bit of safety in mind.
The AquaPod Bottle Launcher ($35) has a built-in pressure valve to keep bottles from exploding as well as a long trigger cable for launch time. All you need is a 2 liter bottle, a bike pump, and some water. AquaPod video after the break.