I'm a missionary kid and grew up in a pretty sheltered, very conservative home. Singapore (where I grew up) is more conservative than America anyway so it wasn't too hard for my parents to keep us kids sheltered from the world.
I actually never thought of myself as being sheltered. We knew what we believed, what we did, and what we didn't do. I was not unhappy or didn't feel deprived in any way. I only realized I'd been sheltered when my husband informed me of it. :)
Now, as a relatively new mother, I'm trying to figure out what my parents did right. So many of my peers have gone insane now that they're out on their own--some of them come from extremely conservative, sheltered homes and some from liberal, unsheltered homes. That scares me because I want my boys (and any other children we might have) to always be good and be close to God. I want to be best friends with them while still maintaining parental authority--I think that's part of the key to my parents' success.
Mike and I have discussed this extensively because I worry about it every time I see a disgusting commercial, a gross new movie, or even homosexuality on Nick Jr. The world is such a horrible place--how do I protect my babies from it without making them run wild after they leave our house? We've come up with a few ideas, but I'd welcome more from you more experienced parents!
1. Be a good example of being close to God. How will kids know how to be close to God if they don't see their parents close to Him? I personally had the most amazing examples in the world.
2. Be consistent. If you have standards for Sunday that are different from your standards for the rest of the week, kids are going to get confused. You should have the same standards no matter who's around. Now, you also have the keep the stumbling block principle in mind so it can get kind of sticky, but you can explain that to them.
3. Be genuine. Don't have standards "just because." You need to have reasons for why you do what you do. What's wrong with women wearing pants? What's wrong with going to the movies? What's wrong with rock music? Kids will test you on everything, so make sure you know why your standards are so high.
4. Make church more important than anything else.
5. Keep bad influences out of their lives as much as possible. This is the thing I worry about the most--we're so surrounded by evil today, how can I catch all of it before it gets to them? I'm already planning ways. Thankfully technology has made it easier. :)
So...to answer my question, I would say shelter, definitely. But don't go crazy and disallow everything under the general heading of "appearance of evil." Too much unfounded sheltering can push kids even further away.