Children seem to show a near immunity, at times, to the power of negative example. I recall a girl I knew well growing up who, immediately after reading Harriet The Spy, began a surveillance program listening in to her parents on the other phone -- until she was caught and roundly punished. Somehow the lesson that spying on people had got Harriet into trouble had been lost, and the fascination of eavesdropping and writing things down in a notebook had remained.
In similar vein, MrsDarwin recently attempted to give the girls an illustrative example of how she had, at a very young age, not understood the purpose of the mass, and had thought that she was being left out of a "snack" at communion time. That this was presented in contrast to the truth that we believe it is Christ who becomes present on the altar was lost on the girls, who proceeded to demand repeated: "Mommy, why did you want a snack in mass? Can I have a snack?" Quieting them down in time to actually go to mass proved a challenge. (Note to selves: No creative attempts at catechesis right before mass.)
This seemed odd to me at first given the numbers of fairy tales that center around the horrible consequences visited upon those who go astray. Surely centuries of negative examples would not have been dreamed up if the technique simply did not work upon the young. But as I thought about it, such stories are always simply and clearly constructed: Introduce character, the character makes a fatal mistake, the character suffers grievous consequences. This construction, children seem to understand quite readily.
The difficulty comes when an essentially sympathetic and realistic character does something which is, by adults, intended to be a negative example. If this character does not seem to be an essentially "bad" character, young children seem to have great difficulty in understanding that this is a bad choice and should not be imitated.
The boy who cried wolf can be readily understood as an object lesson for the very reason that there is no more to his character than that he cried wolf. But if that boy were named Brian and there was a whole children's novel about him, in the middle of which he carried out the crying wolf stunt, I suspect that many children would think it sounded like good fun and want to give it a go themselves.