The only people who should be worried about the cups & balls being "exposed" in a begginer kiddie magic set are the ones who still perform the routine that comes with the beginner kiddie magic set. There are are so many C&B routines out there and so many C&B techniques that it is very easy to build or learn a routine that would completely flabbergast someone familiar with the basic kiddie routine. For example, I don't know a of single kiddie C&B set that has instructions which discuss final loads.
C'mon... Bill Malone's C&B routine on the Here I Go Again DVDs actually uses a "kiddie" C&B set but goes way beyond the basic routine! Then there's the Sankey routine which ends with the production of five different sizes of sponge balls... and don't get me started about David Regal's routine in which he closes by producing a full set of kiddie cups and balls from inside of the standard set he used for the entire routine.
Having said that, I hand-pick the effects that go into the birthday kits I provide and do not include a C&B set. However, it's not because I fear exposure; rather, it's because I prefer to give out tricks that require practically no sleight of hand.
That is a great way of thinking. Obviously a lot of kids don't have the required sleight of hand to pull off a proper cups and balls routine, so including it in a kids' kit isn't doing anyone any favors.
I like PeabodyNJ's idea. Give out one idea and only teach them more if they show genuine interest. That way you keep exposure to a minium and only spend time teaching the really interested. Of course, if no one ever shared any secrets, the entire art of magic would die out.