There's no firm evidence that using 3D on the 3DS or watching 3D movies has lasting damage on children's eyes, AFAIK.
However, children's eyes are still developing up until around the age of 7. This impacts the development of the brain's visual perception (young kids sometimes still write letters in mirror image or upside-down, for example) and the development of body / eye co-ordination as eye movements become more refined.
Advising against exposing them to stuff that might 'optically confuse', and risk impairing any associated development is just a better-safe-than-sorry approach, both for Nintendo's and for the kids' sakes.
Any good parent will not take any chances with their kids' health - I kept 3D under parental controls until my youngest was 7.
To the OP - If I were in your position, knowing the age of the kids, I'd tactfully suggest to the parents that the warning only applies to under 7's, and unless there's some medical reason why they've been told not to, it should be ok for them to play in 3D.