At the end of the day it's the perogative of the performer to do what they feel is right for their audience.
Personally, I have never felt the need to work "blue". A few years ago I enterd a talent competition that was held in a rural bar. The act right before me was a "comedian" who told the filthiest jokes I have ever heard (hey, if you're gonna hear dirty jokes a bar is the perfect place, right?). Any laughter he got was based solely on shock, and the laughter in the room was tinged with nervousness. Then I got up and did my squeaky-clean-bring-your-grandma magic show and I won the competition. As far as I'm concerned shock value is the lazy man's way to attempt to entertain, rather than studying the fine points of comedic structure, delivery, etc.
At the risk of heresy, this is why I hated Avenue Q. I thought the puppetry was brilliant, I thought the music was catchy, and I thought the show was a real piece of garbage. Yes, people laugh at gay puppets who drop the "F" bomb and watch porn on the internet, but for the whole duration of the show I just kept asking myself, "what might they have accomplished if they had taken an approach that did not rely so much on shock value?
On the other hand, I really gag at puppetry that is dumbed down and condescends to kids. It is an insult to everyone's intelligence. But puppetry for adults does not necessarily mean that it has to be so raunchy that kids can't attend.
My magic show is not a kids' show. I don't do kiddie shows or birthday parties. It is simply based on a more sophisticated (for want of a better word) humor that collectively kids don't get. But by the same token I do not have to change a single word of my show when kids are present. For over twenty-five years I have had a strict policy of not being paid until after my performances, and then only if they enjoyed the show. I have never been denied, and in fact I often get bonuses and referrals.