Question: What is happening in the brain to make it easy for babies to learn language than older children? How does this process look in the brain in sign-language-only households? What about bilingual households?
This is a great but very complicated question because language is comprised of so many different skills. One thing we know for sure is that through exposure to one language our brains tune into the sounds in that particular language – this both helps us with our native language but also hinders us in hearing and reproducing the sounds in other languages. For example, in English we have the sounds /b/ and /v/ as in BAN and VAN. However, in Spanish the letter B is pronounced somewhere in between the English /b/ and /v/ – have you ever heard football commentators say “Xabi Alonso”? If said correctly his name sounds a bit like Chavi but not quite and different commentators say it differently. This is because its actually incredibly difficult for a native English speaker to hear the sound represented by the letter B in his name, because our brains are tuned to either hear a /b/ or a /v/ not something in between. This in turn makes it hard for us to produce the right sound. The process of tuning in to our native language tends to happen around 1 year of age for typically developing infants. Another good thing to know is that if we are exposed to two or more languages from birth our brains can tune in to multiple languages, so we’ll be able to hear and produce the sounds from all languages just fine. Some research on all of this is discussed in this paper: http://rstb.royalsocietypublishing.org/content/363/1493/979.long
So, to summarise, one reason we find it harder to learn languages later in life is because we find it hard to hear and produce the right sounds.
With respect to sign language, just like spoken language it is comprised of a phonology (not speech sounds in this case but combinations of hand gestures), vocabulary and syntax. And research suggests that similar brain areas are used when adult native signers view sign language as when hearing adults listen to spoken language: link here.
It therefore seems likely that learners of sign language would tune into the properties of their particular sign language (e.g. ASL, BSL) in the same way as listeners do to their native spoken language, although I’m not aware if there is research on this.