I copied this from the children's museum that we take my daughter to. It consists of 3 2x4x8' kiln dried (don't use pressure treated... bad for kids), about 15' of rope, some staples and a wooden dowel. The total cost is under $10 and it can be made start to finish, including clean up, in about an hour. I made this for free from scraps I had on hand.
I never took measurements of the museum xylophone and built this on memory and guesstimation, so please feel free to do so on yours as well.

Step 1: Measuring, Cutting and Sanding

I made 9 "notes" on this xylophone, so all of my measurements will be based on that. The "notes" were cut starting at 36" and the next one was 2" shorter and so on (36, 34, 32, 30, 28, 26, 24, 22, and 20 inches). After all of these pieces were cut I ran the belt sander over each piece smoothing them out and rounding over the edges.

I cut the 2x4x8' as follows
-- 36", 34" and 26"
--30", 24", 22" and 20"
--28" and 32"

the first 2 equal 96" exact, so when cutting split the line to get it close... you could break them up differently to get better measurements, but come on.

Step 2: Assembly

Next, I measured and marked the center of each "note". I then started at the 20" piece and measured out 2" from center making a mark for where the rope will be stapled. For the 22" I measured 3" from center, and continued adding 1" from center to the next larger piece.
Find the middle of the rope and leave about 1' of slack to tie the xylophone off. Start stapling the rope at the marks on the first "note" and leave 1 1/2" of space between notes as you staple. (why 1 1/2"? because that's what the scrap wood is). Making certain the centers are kept in line. Don't cut the ends at the long side, as they will be used for tying up the xylophone too.

Step 3: Tie It Up and Play

Now you just have to find somewhere to hang the xylophone, we have ours on the farmer's porch so that we can play even when it rains. This winter I'll install hooks in the playroom.
When you hang it, the angle and "droopiness" of the xylophone will have an impact on sound so play around with it to get the best sound from yours. I sanded down the dowels and used them as mallets, but you can use whatever is handy. Have fun, my daughter loves hers.