I'm looking at getting a wooden playset (one of those with a rock wall, swings, slide, and small clubhouse up top) and I was wondering what type of lumber I should be looking for. Not so much the type of tree it came from but the treatment of the lumber after it was cut up. Should I find a set that is made from pressure treated wood or a non treated wood? I would guess that pressure treated wood would last longer and be less maintenance but is that safe for kids to play on for hours at a time? If I went with the non-treated wood, I'd apply a deck sealant to the pieces as I'd build it.
You won't want to use pressure treated wood in any application where people will be touching the wood often, especially children. Cedar is a good wood for outdoor applications, and is often used in playhouses and swing sets. If you've got really deep pockets, Teak is a very good choice for outdoor applications. Teak is often used in higher end patio furniture, because is is very low maintenance and stands up well to weather, due to its high oil content much like cedar.
You could probably get away with any type of wood (even pine), but you'd have to seal it yearly and replace pieces if they did start to rot.
Cedar, cypress, redwood, teak, ipe, etc. There are many choices that are hardy to rot, and do not have nasty stuff in them for small children to be in sustained contact. Of course, some of these alternatives are incredibly expensive, or may not come from sustainable sources.
You might also consider an alternative like Trex for some components, and my father once made a set of lounge chairs entirely from 2 inch PVC pipe. Be careful of course, as these materials have limited strength, and PVC will be sharp when it shatters.