At that age, both my sons loved Hi-5. We would let them watch the VCDs or just play them without turning on the TV and mime/sing/dance along. We also bought some simple children's musical instruments - you can get a kit at Tom Lee, which includes a tambourine, jingle bells, etc. - to play along. I find that the children are particularly interested in listening to other children sing or watching other children perform, so we just bought them on-line or borrowed them from the library. The Wee Sing series comes with a book of music as well as the lyrics along with the CDs. You can get them at Fleet Arcade on Fenwick Pier on the 2/F.
When my elder one was 2, he loved "The Book of the Orchestra" which comes with an accompanying CD and introduces them to all the instruments in the orchestra. We borrowed it so often from the library that we ended up ordering a copy ourselves! He also really like watching the Baby Proms, which has pre-school children in the audience interacting with an orchestra of young musicians. The copy I received is from the Western Australia Young Symphony, but lots of orchestras participate in them.
I only did Kindermusik very briefly with my first. He was interested in the music at the beginning, but after a pretty short while, he lost interest. I realized he was bored with the music and just needed more variety and you can't have that if you join a class.
For those of you who are Christian, there is also the children's program at Bible Study Fellowship - a 8-year, non-profit non-denominational bible study, which meets once a week. The music in that program is also really good and all the children receive a copy of the sheet music to use at home. You can also order the CD from the US which contains the songs both sung and instrumental-only. Starting next year, they'll be accepting children under 2 (over 6 months). Please note that this program is only for children of members attending the adult class at the same time - i.e., no drop-off for the children only.
Hope this helps!
I was a children's leader for three years and only stopped when my first was born, because they didn't access under 2s at the time. I've now signed up to go with my second for next year, and unless I have a third, would love to go back to leading in the children's program!