You know, this is a subject that I have put a lot of though into lately.
I honestly think that the threat of hell (or damnation, or outer darkness) is the reason Christianity has maintained it's "popularity" (Islam included).
I cannot tell you how many times I have been pondering the question of god(s) existence, and come to the conclusion god does not exist, then only to have been swept up by my memories of "Hell" or even "Not being in Heaven with my family who will be there because they believe".
It's a pretty powerful tactic - dare I say strategy? - that gets to the deepest emotions of us humans, that is, our desire to be with our loved ones.
This why I have come to the conclusion that Hell and Heaven are obvious constructs of man, created for the sole purpose of control.
Regardless of the reasoning, telling children about these horrific things, as if they are fact, when we have no evidence for them other than our imagination is reprehensible. I would even categorize it as child abuse personally.