OUTLINE: This is a dose escalation, multicenter study. Patients are placed in one of three age-related strata: stratum 1, 3 to 21 years of age; stratum 2, at least 2 but less than 3 years of age; stratum 3, at least 1 but less than 2 years of age. Patients receive an induction dose of intrathecal liposomal cytarabine (Depofoam encapsulated cytarabine; DTC 101) administered once every 2 weeks for 2 courses. Patients who have achieved a partial response or received significant clinical benefit with stable disease may receive a third induction dose of DTC 101, 2 weeks following the second dose. In the absence of progressive disease, patients can proceed to consolidation therapy. During consolidation therapy, intrathecal DTC 101 is administered once every 4 weeks for 2 courses, beginning 4 weeks after the last induction dose. Patients experiencing a complete or significant response can proceed to maintenance therapy. Patients receive a maintenance dose of intrathecal DTC 101 once every 8 weeks for a total of 6 doses, beginning 4 weeks after the second consolidation dose. At least 3 patients are evaluated at each dose level. Dose escalation to the next level proceeds when a minimum of 3 patients per cohort has successfully completed induction therapy and been evaluated. Patients will be followed at 1, 2, 3, 6, 9, and 12 months post treatment, until relapse or death.