*Pulls out the Bible*
I believe the exact quote was this (From Megamorphs 2)
Ax
[Fusion bomb?] I asked. Then I laughed. I know I shouldn't have, but you have to admit, it was funny. [A fusion explosive? That's what it was? I assumed it was a small proton-shift weapon, at least. Fusion is only used in children's toys. You know, to make the little dolls speak and so on.]
I have always taken this to be literal. Firstly, Ax, throughout the whole series, was constantly pointed out as having almost no sense of humor whatsoever until later on in the series. Considering 75% of the time he wasn't able to tell when someone was being sarcastic, I wouldn't think he would, this early in his interaction with the humans, be capable of using sarcasm himself.
I would think that having something like a small source of fusion energy in a toy, given the way Andalites live, would make sense. It was written in The Andalite Chronicals that, despite Andalites having rather few possessions, they did have toys for children, and it seemed implied it was more than something like just one or two. (Elfangor, when he went to his weird, mixed up, time-matrix world he said he wanted to run home and play with his toys. Which was a leetle weird considering I got the sense he was 16ish, but hey, I won't judge. Guy had a rough time.) Considering this, they must have had relatively high tech toys. The few examples of toys I can think of were a couple dolls, one that spoke and one that wasn't really described (HBC) and some sort of sophisticated gaming console (HBC, Barafin.) If they have the ability to use things like gaming consoles on the Hork Bajir planet, they would have to have a very sophisticated energy source.
Andalites have no cities except for space ports, which means they most likely don't have very many toy shops or areas of commerce or anything like that. Any toy they had would have to have a very long lasting energy source, since they can't just run out and grab some batteries. Because, who really wants to deal with a tail-whippy temper tantrum? Since they are sophisticated enough to harness nuclear energy in a safe way, it makes for a very long-lived battery essentially. (At least I think, I could be wrong, I'm into biology more than physics, lol.)
In reality, fusion is probably very low, simple tech for them. We have it in power plants, so I'm sure it would cost Andalites fractions of pennies to create something like that. I would think something like a shredder would be considerably more costly than a toy that had a fusion energy source.
The only other option I could think of would be something like solar energy, but it would be highly impractical to have a bunch of Andalite toys strewn about to soak up the sun to make sure they still work on cloudy days or something.