When Arlo was around two or three, he enjoyed breaking crayons more than coloring with them. I had researched making new, bigger, toddler-friendly crayons online and through trial and error found a process that worked for us.
We gathered our broken crayons and removed the paper. I would suggest tossing any remnants that are NOT Crayola brand. They don't seem to work well for this project. You can break the crayons down further, but the effect of various sized remnants is pretty neat.
Using a silicone baking mold we bought at Michael's, we filled each well with broken crayons of similar colors (greens with greens, reds with reds, etc).
I put the mold in the oven at 200°. The crayons need to bake until they are thoroughly melted. I think this took us about 20 - 30 minutes. You just need to keep an eye on them. (The kids might like to watch them through the oven window)
Once the wells appear to be filled with liquid, remove the mold from the oven and place it on the counter to cool. I have learned that putting them in the freezer makes them very brittle, so letting them cool at room temperature is the way to go.
Once the crayons feel cool and firm, you can remove them from the mold. Depending on how thick your crayons, this can take up to an hour. Save your mold for the next batch - I would not use it for food.