I agree with Momma Cluck, 4-H is definitely about learning and having fun, I think kids that are showing should get more credit than that, they aren't all showing because they think they're going to win everything and blow everyone away, a county fair is not someplace you should go into critizing people's birds expecting show quality.
I also don't think you should tell them 'Your bird is NOT show quality and NEVER will be!', saying that is not doing any good, however kindly explaining the faults and what the bird should look like will help them alot.
I remember my first year of showing pigeons was horrid, I think I probably did everything wrong; if the judge had said 'Your bird is NOT show quality and NEVER will be!', I probably would not have wanted to go to that certain show again because he would be there, and been a bit discouraged. But he did not, he helped me, explained it all and was very kind, the next year I went back and got grand, out of a class of 40+ birds.
Sure, not a whole lot to brag about, but kindness goes a long way.
Having said that, I do think that saying a bird is SQ, that obviously isn't, is very wrong, and those people who do that should not be selling any birds.
Also keep in mind that many 4-H clubs' regulations, rules, and programs often differ greatly in each county.