I let parents watch, and have yet to have anyone be disruptive. As others have said before, parents have the right to know what's going on with their kids. Also if you are secure in what you're doing, it's a great means of advertisement- parents talk to other parents....good old fashioned word-of mouth...
I also find it gets the parents more interested in the martial arts, they start seeing this not as only something their children do, but as something they can do WITH their children....
I've yet to have anyone be disruptive, but if they were, i'd ask them to stop. If they continued, I wuld ask them to leave, as their actions were disrupting the class in progress. If they start ranting and raving about how they pay blah blah blahand they're going to pull the kid out, I'd say fine, if that's what you feel you need to do, go ahead.
I 'd rather lose one student that have a continually disruptive presence, but I would also rather allow the parents to have some interaction with their child's training, so I say let them watch unless it becomes a problem.