I know this topic comes up every so often in etiquette-related posts and I can see both sides of it. On one hand, many people pull up a piece of pavement an hour or more before the shows and parades start in order to secure the best spots available. I know we did for the UCF Fiesta Bowl parade a couple years ago and also the first year my dad was in the cast choir (waaayyyy back when the Candlelight Processional was still at MK). It's not reasonable for late arrivers to expect early birds to make room for a bunch of people and negatively impact the experience they waited for.
That being said, I have kids and I can't tell you how many times my now-10 year old (when he wasn't over 5' tall!) was either completely ignored or was very rudely rejected when he politely asked to get a better view in front of someone. It's gotten worse for my 2.5 year-old, so I don't even bother asking for her anymore. I just automatically throw her up on my shoulders (which I know is another thing that gets people riled up on here).
Frankly, letting a couple toddlers in front of you so they can see isn't cedeing "your ground", it's just common courtesy (which sadly, isn't so common these days). But I also agree, large groups of kids, older kids and teens who can generally at least get an obstructed view behind people, well, parents shouldn't expect people to make way for them (nor should they get upset when people don't).