First of all I would like to apologize for your neighbors behavior. We have been instructed from our prophet that associating with other not of our faith is a wonderful thing and should happen. The reason your neighbors may have chosen to do this hurtful thing is that they have been caught up in the culture of mormonism rather than the religion. the religion teaches to love everyone, even those not of the same faith. Again I am really sorry for their actions.

This is not a part or our doctrine or our faith. Some people go overboard no matter what there faith.  
 
If this was brought up to there Bishopric appropriate action would be taken to council the parents that there actions are not reverent of Christlike.  
 
The decision to only associate with other Mormons though is there choice and while it is the wrong choice fueled by distrust and is of the great deceiver, it is there decision to make.