Funky Houston caterpillars

I don't even know for sure if they are caterpillars, cuz they are sooo weird looking. But past the two sets of fuzzy antennae, three distinct white humps on their backs, red heads, and varied colored bodies, they do resemble a caterpillar. These are all over our apartment building. And the kids are fascinated with them! At first I had them convinced they might be poisonous and to not touch them. But that ended when Carleigh picked on up and played with it. Then the collecting began! At one point I think they had over 20 in one small bug carrier. All fine and good, I guess.
But then yesterday Carleigh broke out in a rash on her legs, face, and torso. I cannot figure out what it is from! There are no spots on her back, but they are all on her front. So I've decided that she must be having some allergic reaction to the caterpillars. (Not sure if it is true, but I'm going with it.) I told the kids this morning as we left for the bus stop to not touch any caterpillars as Carleigh already had a rash. Jonas, the smart boy he is (grrr) quickly says "Well I didn't get a rash so I must not be allergic. I'll catch them all from now on!" I guess I'm glad he doesn't spook easily.
Carleigh called me out on the porch a few minutes ago to show me that one of the caterpillars seems to have turned in to a cocoon. Hmm. Could be. Looks like it. Now we'll wait and see what happens. I am kinda excited about the idea, and very glad that my kids collected those weird things. Maybe we'll see a complete metamorphosis on our very own back porch!

Update: I've discovered that these are Tussock Moth caterpillars. http://eny3541.ifas.ufl.edu/Tussock/Orgyia.htm This site talks about the Florida variety, but since our climates are similar, I don't see why these can't be the same as ours. AND they are considered mild stinging caterpillars, thus Carleigh's rash!