From a reader, more on "chat rooms."
We, also, have avoided the cry room in our church at all costs ever since the Sunday we sat there with our now-11-year-old who was about 2 at the time and very fussy that Sunday. I have no idea what happened during Mass because a parish council member sat in the back of the area with her daughter, who was about 11 or 12 at the time. The two of them talked and laughed loudly throughout Mass. "Angry" comes close to describing my emotions at the time. We kept asking ourselves afterwards "how are we supposed to teach the boy how to behave in Mass when the grownups won't?"
So our strategy changed. We began sitting as close to the front as we could, and walking with the baby/toddler to the back of the church if we had to b/c of fussiness. We only leave the church for the narthex in extreme cases, and that's only happened a couple times. While we were up front with our son (and later his younger brother, and now his one-year-old sister) we would point out from time to time in a whisper in the child's ear the interesting things going on. Current examples: the processional, the bells, her brother the altar server (although this can backfire when she squeals for him to look at her), Jesus on the Cross in the front of the church, Mary to the side of where we sit, singing the various songs.
I recently found a booklet called "Catholic Etiquette for Children at Mass" by Kay Lynn Isca (OurSundayVisitor 2001, 30 pages). You may have mentioned it on your blog before, but I didn't see it. This is a pretty helpful guide to kids at Mass, divided into sections with age-appropriate advice. Among other things, she encourages parents to leave the Cheerios at home and discusses rewards for good behavior.
I'd also recommend Guiding Your Catholic Preschooler by Kathy Pierce and Lori Rowland.