Is everyone aware that L. Frank Baum wrote many many more books in the Oz series? It's a whole series of stories, and it's delightful. The first book in the series is different than the movie adaptation. I highly recommend the series.
When I was a child, here is the understanding that I had of the "gifts" given in the movie. The "wizard" gave them concrete objects, but pointed out to them that they already had what they desired. The concrete objects that he gave them merely made them realize that they already had it.
Please remember that many children enjoy SEEING and HOLDING something. They can't think abstractly, so they need a tangible thing to hold on to.
Think of the medals that many Catholics wear (especially children)--we all know as Catholics that the medal has no power in and of itself to protect us or grant us the answers to our prayers. The medal is a symbol of what we already have--access to the saints and their intercession. We take comfort in the medal because it is a visible, tangible reminder of the invisible reality.
The Scarecrow was the smartest one in the trio, always coming up with solutions to problems--and yet he desired brains. So he gets a diploma as "tangible" evidence that he has brains.
The Tin Woodman is the most emotional of the trio and certainly the most tender-hearted--and yet he desires a heart. So he gets a watch shaped like a heart as "tangible" evidence that he has a heart.
The Cowardly Lion is the bravest of the trio, willing to protect Dorothy--and yet he desires courage. So he gets a medal as tangible evidence that he is brave.
As a child, and later when I grew up, I always admired the trio of friends because they were so humble and modest that they didn't realize that the had the virtues that they so desired. A lot of heroes are this way--we tell them how smart and caring and brave they are, and they deny it all and say that they just did what anyone would have done. We should be this way--humble about our strengths and always desiring to be more intelligent, more tender-hearted, and more courageous.
Again, I recommend the whole series of Baum books. And I also recommend that we do as the Bible says and instead of always looking for flaws and errors and finding fault and analyzing the supposed evil, we should let our thoughts dwell on what is true, honorable, right, pure, lovely, and of good repute. There is a great deal more Philippians 4:8 in the Wizard of Oz, movie or book, than evil.