We've never hidden it from my two year old and don't ever plan on it either. Here's a bit from a now closed post:
http://www.crossdressers.com/forums/...t=#post2299791
If you want to keep feeling shame about your CDing, then don't tell. If you want to add another layer of inconvenience to your life, then don't tell. If you don't want to teach your kids first hand about tolerance, open-mindedness, and respect for differences in others, then don't tell. If you like secrets and subterfuge, then don't tell. If you don't want the kids to someday respect you for your honesty and strength, then don't tell.
I just couldn't live with myself if I had to be that closeted and I wouldn't want to be that sort of parent either.