Honestly, some kids can grow up as Witnesses and, even if they leave, be fairly well-adjusted as grown-ups. And yes, there's plenty of good association among Witness kids.
But many Witness kids are good at leading double lives. Practically all of my peers in the congregation were hiding things -- they were stealing, watching violent movies and playing violent games, and swearing. But to most adults in the cong., they were "good association". Even though our classmates at school were doing some of the same bad things, at least they weren't leading a double life. You could clearly see who they were as soon as you started getting to know them.
You probably need to try other churches. But even before that, one easy step you can take is to look up the word "Jesusism" on Wikipedia -- why not do it right now and then come back to this post? I was actually somewhat shocked to read the simple definition of this word, because I had assumed, as a lifelong Witness, that if I left "the truth", I had to give up my whole moral foundation -- an idea that sounds silly when I say it out loud, but this was how I was programmed to think.
It was only when I learned that word that I realized that being free meant that I could literally chose to live however I wanted -- even just like a Christian -- without organized religion in my life! I could be as strict as, or even stricter than, a Witness if I wanted. I actually felt relief at this thought, and began to feel a burden lift from me. I had been scared that I would become some kind of lawless maniac if I left the religion, but finally I realized that, since the love of being a good person was within me, I didn't need anyone else to guide my life in order for me to still try to be good.
As finally awake said, your kids are going to see and hear things they shouldn't have to from their schoolmates, but you yourselves can provide the good example at home that counteracts any negative peer pressure. As for friends, it could be that going to a church in the area will help you find other parents whose children you would want yours to associate with. At least they probably won't be raising their kids so strictly that the kids are forced to develop a split personality in order to hide who they really are from their parents.
