If money is not a problem I would recommend Apple TV.
Apple TV has the advantage of begin wireless, and as you said, your parents will be able to control it from their seat. This quite useful for watching watching shows, but even better for other things, like looking at pictures on your iPad on the big screen, for example.
On the intuitiveness, if your parents already know how to access the multitasking bar at the bottom of the iPad it is pretty easy: just a switch away. Practically speaking, easier than dealing with walking, plugging it in, and having to stand up to input things to the iPad, or dealing with a long cord.
Apple TV has many other advantages/features: Photo Stream through iCloud, Netflix, Youtube, flickr, Internet Radio, WSJ, Movie Rentals, TV Show Store, etc. I don't know how many would your parents use/need, and of course Movies and Shows come for an extra cost, but its something to keep a thought on.
It's $40 dollars more expensive though. If your parents don't need such features, they don't mind a cord, and if they don't really need controlling their iPad while displaying something on the big screen, than it's some good $40 to save, but if you can spare it I think you get plenty of extra features and wireless commodity from it.
You can use VLC to create a network stream, then open this network stream in the VLC app on your iPad.
For more information, see:
Besides VLC you can use for example AirVideo, Plex or Infuse.
Best Answer
There is nothing that steps into the iPad at a low enough level as to simulate a swipe to unlock. Even the external keyboard connector could be extended, but that won't allow total control of the device even if you could operate things without seeing the display. There is no concept of a mouse or pointing device in the iOS or the iPad hardware.
You might want to consider a generic LCD panel / speaker system and an iPod touch or iPad with a cable that will reach to the front seats. You could queue up the entertainment and use the video out to present it to the passengers in the back until such time as they can learn iOS and be trusted to hold the iPad. It won't take long for that to happen or for them to show you every hidden feature you never knew existed or could be enabled in the iPad.
This use case screams for an AirPlay video receiver but those aren't shipping yet even in the living room.