If they believed that human toys were toxic...

It IS said, over and over in both movies, that anything a child has touched is toxic, not just toys, either. Remember how the CDA reacted when poor George got that SOCK stuck to his fur? It's never said that humans in general are toxic, just children, and anything that the children have touched is toxic as well. The things that Mike had to handle at the camp were all things that the campers, whom were children, would have handled, like the doll and the phonograph.
Mike had had it practically drilled into his mind that those things would kill him or at least make him very sick if he came into direct contact with them, but he did so anyway, with no ill effects, so you'd think he would have figured out just from that experience that if children's belongings WEREN'T toxic and didn't harm him, that maybe that long-held belief that children themselves were toxic wasn't true. Clearly he didn't figure that out, though, because he is totally freaked out by Boo in MI.

pitbulllady

I think they just kept the situation to themselves afterwords. Had they said:

"Guys we touched a doll in the human world and it was not toxic!"

They would have instantly been quarantined. I would assume that maybe they kept it to themselves and perhaps forgot over the years?

That is EXACTLY what that whole "toxic children" thing was: propaganda cooked up by the government, the monsters in charge, not just at MI(which was just one of many Scream collection/power companies, after all)but all over their world, for generations. A lot of that had to do with the monsters' history. If you have the DVD, there's a rough-animated short on it called "The History of the Monster World", in which it explains that the monsters were originally HUMANS themselves, living in our world, but were considered odd-looking and strange and were ostracized by the "normal" humans, who called the odd ones "Mons" and referred to themselves as "Mans", dividing the two groups of humans into two separate tribes. The two tribes fought and fought, and 100,000 years ago, the Mans eventually won, driving the Mons to build a ship and try to escape. The ship wound up sailing through some sort of wormhole(perhaps in what's now the Bermuda Triangle?) and ended up on an island in a parallel universe, an exact version of our Earth, with one exception: genetics worked a bit differently. When you ate something organic, that organism's DNA became incorporated into YOUR DNA, thus the saying, "you are what you eat", became more or less literally true, and that accounted for the wide array of Monster appearances. They never forgot the treatment they'd received from the Mans, though, and through the generations that hostility grew and grew. When it was discovered how to manipulate worm-holes at will and re-enter the Human World, they learned that their appearances terrified humans now, especially children, and that led to the discovery that children's screams of terror could generate power, clean, efficient, power. At some point the story of children being toxic got started, and took off from there. It would have a practical use; like you said, it "demonized" human children, removing any guilt that monsters would have about traumatizing them night after night. It also probably was intended to prevent any "free-lance" exploration of the Human World by monsters, by instilling that fear in THEM, and it also gave the powers-that-be an excuse to control and manipulate the monster populace. The analogy between the CDA and our own NSA is far too similar to ignore.

As far as the "Stinging Glow Urchins" in MU, used as substitutes for human children toys, those were actual animals, similar to the sea urchins(which are also venomous and capable of inflicting a nasty, painful injury if stepped on) in our world, just with bio-luminescent abilities and much more potent venom. Claire Wheeler states at the beginning of that Scare Games challenge that the urchins were supplied by the Biology Dept. of the university.

pitbulllady