It actually didn't bother me that much in VV1, probably because the parent's info don't show up for the kids (so I can pretend I forget who's parents are who). My villagers in VV2 tend to be fairly well-behaved when I'm looking, but once I caught someone "going out" with his mother. I literally yelled "stop that!" at them and broke them up and sent each of them to work in a different corner of the village. I was so angry (yeah I know it's just a game)!
I think I can turn a blind eye to siblings who try to mate with each other. I draw the line at parent/child, though. Even though I know these are just pixels with some strings of 1's and 0's attached to them, the whole idea just disgusts me so much. I guess there are lots of creation stories in different cultures were the first siblings had to mate with each other, but going with your parents seems to be universally considered a bad thing.
I think when I get bored with just running the village, I might try the notebook/spreadsheet method (I was thinking more along the lines of Excel or Access; didn't think of using PowerPoint! Then again, I hate Ppt with a passion so I don't think about it when I don't have to...lol).