The cargo train struck the van as it crossed an intersection near the town of Hillah, about 60 miles south of Baghdad, said a police spokesman, who requested anonymity because he was not authorized to speak to the media.
Zuhair al-Khafaji, an emergency room doctor at Hillah general hospital, confirmed the deaths. He said some of the children were the couple's and others were their nieces and nephews.
In the capital, a bomb hidden inside a mini van exploded near the Baghdad governor's office on Monday, killing two people and injuring six others.
The bomb exploded near the heavily guarded Green Zone, which houses the Iraqi government, the U.S. and some other western embassies. It was unclear if the bomb, placed inside the bus, was detonated remotely or just went off.
The explosion came Baghdad lived through some of the most peaceful momements since the U.S. invasion in 2003. Violence has dropped by 60 percent in the past six months, mostly due to a surge by thousands of American troops, the help of Sunni Arab irregulars on the U.S. payroll, and a ceasfire by radical Shiite cleric Muqtada al-Sadr and his Mahdi Army.
The U.S. ambassador to Iraq said that recent successes such as reducing violence have created a new set of challenges for 2008 - the most important being the return of refugees and the struggle for political reconciliation.
An equally significant factor, Ryan Crocker said Sunday, will be whether neighboring Iran uses its considerable influence among the Shiite majority to ease the strife that has torn this country apart or instead create further instability.
"The positive developments in the latter half of 2007 represent the challenges of 2008," Crocker told reporters in Baghdad. "There will be the ongoing challenges of reconciliation, and if there is a single overarching issue that will determine the future of this country that is it for me in one word."
Others include the return of hundreds of thousands of Iraqis who have fled to Jordan, Syria and beyond - a repatriation which Crocker said must be handled carefully "so it doesn't sow the seeds of new tension and instability."
Equally important will be finding how to reintegrate the growing numbers of Sunni Arabs joining volunteer groups funded by the United States to fight al Qaeda in Iraq. There are about 70,000 Sunni irregulars in the groups known as Awakening Councils - dubbed Concerned Local Citizens by the U.S. military.
But the Shiite-dominated government is deeply concerned about the groups, many of which are made up of former Sunni insurgents who once battled both the American forces and their Shiite allies.
There are plans to absorb about 20,000 men into the security forces, and Crocker said America plans to spend $155 million to help create new jobs and provide vocational training. The Iraqi government would match that amount, he added.
"They also present a challenge," Crocker said of the Sunni groups. "They have got to be accommodated in some way that meets their needs and concerns, but this has to be done in a way that also ensures that other elements of the population and government are comfortable with."
Another immense challenge will be how to deal with al-Sadr's Mahdi Army that has gone from "militant" to "incorporated."
"It still very much exists as a militia structure, just smart enough not to be carrying arms through the streets, but in effect controlling various neighborhoods - jobs, real estate and gasoline, what have you. That as a long term challenge is going to be huge," Crocker said.
Nothing in Iraq, however, is clear cut or simple, and Crocker said external factors such as Iran will continue to play a big role in the future stability of the country - which slipped in and out of chaos in the years following the 2003 invasion by a U.S.-led coalition.
"If it's a case of the Iranians moving down a road of using influence to reduce rather than to foment violence, that is a good thing. They would still in our view have a way to go," Crocker said.
Iran's influence remains powerful but Crocker acknowledged it was hard to predict whether it will remain that way and how they might wield it moving forward.
"I think that as we have seen in past, if the Iranians want instability in Iraq they are well positioned to create it, and create it in substantial amounts. Can they exercise sufficient negative influence to prevent the emergence of a stable Iraqi state? I'm not sure," he added.