I thought about creating this lab for years after noticing that one of the most engaging and challenging parts of working with circuits was figuring out what was wrong with them when they were not working. It is an excellent activity that incorporates the drawing of schematics, logically testing circuits, and working with partners.
For this unit to work best, you should collect faulty materials that are not obviously identifiable as such. Note that it takes a long time to fully discharge a battery, so hang onto dead batteries as they arise, because they are a useful addition. Similarly, this lab requires all of the things you used to throw out: faulty test leads, burned out bulbs and motors, broken switches. In addition to these, have the students think about other faults that may be present even when working with good materials (poor connections, batteries in series with like poles facing, etc.).
I had some worn test leads that worked sometimes depending on their position. I took these apart, clipped the wire, and reassembled them so that they would definitely not work. You can burn out a bulb by sending too much voltage through it. The same goes for motors. Bulb holders can be "Broken" with a piece of tape covering the pole in the bottom of the socket. Other items can be incapacitated, similarly, with tape on the poles of battery holders or switch contacts. Let the students know which faulty materials are available for them as they design their circuits.
I have included a rubric and a photograph of some student schematics. The hand-drawn schematics at the end of the lab may or may not be helpful. Some of my other electricity labs include practice drawing schematics, but students should be able to complete these without that prior experience.
I spent 3 hours on this activity at the end of a unit on electricity. There is some logic to covering troubleshooting earlier in a unit, and this may require a bit more of an introduction and instruction, but will help students on other projects.
I have listed this as being possible with third graders, but I think they would require a good deal of teacher support to begin.
If you are not clear on where students should begin with their troubleshooting, the first step is to create a simple circuit with a motor or a lamp. Once you have a working circuit, you can use the parts you have to test the rest of your faulty circuit but substituting parts of unknown status. Be sure to explain to your students how this approach can be applied to many problems in life, and see if they can come up with some examples.