While it is
currently TRUE that a derivative citizen (child of a naturalized parent) can apply directly for a passport, it is more complicated that most people want to deal with and takes longer than a regular passport adjudication. The State Department has stated that they intend to publish additional forms to accompany these types of cases (not sure if it will have an additional fee or not),
in the alternative, they might decide to demand that the child get a Certificate of Citizenship first.
As for the current process (which if you took a STRICT reading and interpretation of, EXCLUDES "derivative citizens" and truly ONLY applies to citizens from BIRTH rather than from a parent's naturalization):
SEE:
http://travel.state.gov/passport/get/minors/minors_834.html#step3minor click on step 3 and then see the link for Secondary Evidence at:
http://travel.state.gov/passport/get/secondary_evidence/secondary_evidence_4315.html and scroll down to:
"Foreign Birth Documents + Parent(s) Citizenship Evidence"
IF you claim citizenship through birth abroad to U.S. citizen parent(s),
but cannot submit a "Consular" Report of Birth Abroad or Certification of Birth,
[OR Certificate of Citizenship (which are all PRIMARY EVIDENCE)],
THEN you must submit all of the following:
Your foreign birth certificate (translated to English)
Evidence of citizenship of your U.S. citizen parent
Your parents' marriage certificate
A statement of your U.S. citizen parent detailing all periods
and places of residence or physical presence in the United
States and abroad before your birth
NOTES:
See Documentation of U.S. Citizens Born Abroad for additional information.
For information on foreign born children adopted by U.S. citizens, see the Child Citizenship Act of 2000.
Foreign language documents should be accompanied by an informal or formal English translation.
[Out of wedlock children have huge additional evidence requirements!]
*******************
Primary Evidence of U.S. Citizenship (One of the following):
Previously issued, undamaged U.S. Passport***
Certified birth certificate issued by the city, county or state
Consular Report of Birth Abroad or Certification of Birth
Naturalization Certificate
Certificate of Citizenship
*** Passports may be easily revoked by the State Department administratively, with NO Administrative Appeal rights. To fight it you have to literally "make a federal case out it" by going to a Federal District Court and then on to the Circuit Court if necessary and finally all the way to the U.S. Supreme Court, if that's what it takes.
In the long run, filing the N-600 is the more prudent choice. In the absence of immediate travel plans for the child, wait for the Certificate from USCIS and it ALONE will serve as the child's proof of USC for the passport. Also, the parents' Certificates of Naturalization or Citizenship DO NOT have to be surrendered during the N-600 adjudication they way that they MUST BE handed over during a complex passport adjudication.
Lastly, as previously mentioned, USCIS filing generally only go UP. They fees are studied and may be adjusted every 2 years as required by law.