All the safety experts say it's safest for a child to rear face as their spine is not strong enough to protect the spinal cord if they are forward facing. It's not strong enough because the vertebrae are in pieces joined by cartilage. The vertebral arch has not fused into a complete circle of bone, which will enclose and protect the spinal cord.
I'm studying Human Osteology, human bones, for archaeology, and I have to learn about skeletal development. This picture is in my textbook, (White, T. Human Osteology, 2000)the classic text for this subject.
In the first picture there is a cervical vertebrae for a one-year old (left), and beside it a cervical vertebrae for a 6 year old (right). Note that the 1-yr old's vertebrae is still in pieces.
http://pic20.picturetrail.com/VOL133.../293669158.jpg
In the 2nd picture, thoracic vertebrae for a 1 yr old (left) and for a 6 yr old (right). Note that the 1-yr old's vertebrae is still in pieces.
http://pic20.picturetrail.com/VOL133.../293669157.jpg
In the 3rd picture, lumbar vertebrae for a 1 yr old (left) and for a 6 yr old (right). Note that the 1-yr old's vertebrae is still in pieces.
http://pic20.picturetrail.com/VOL133.../293669156.jpg
The vertebrae do not begin to fuse until age 3-6 years old. This is why rear-facing is the safest as it gives more support and protection to the incomplete vertebrae and therefore the spinal cord. With vertebrae in pieces, a forward facing child has a greater chance of damage to the spinal cord when their head and neck whip forward and back in a crash.
To see what I mean by crash forces a child experiences in a crash, go to http://www.cpsafety.com/articles/stayrearfacing.aspx
Scroll down the page to read the section titled "Why should my child rear-face past 1 year and 20 lbs?" for an explanation of crash forces and look at the crash test videos of forward-facing and rear-facing seats, the videos are at the bottom of the page.
We have car seats that allow children to rear-face up until 30-35 lbs, each seat varies. For many children this is well into their 2nd year if not older, and closer to the age when their vertebrae are fused. We just need to use the seats rear-facing to give children more protection in a crash.
I just thought some people here might be interested in these pictures.
Nicci
ETA: Link to crash test videos, more information about crash forces in an accident, and typos