OffTopic - Sizzledog ... I love your signature!
OnTopic - This is how I see this issue.... (pardon me for the length)
I consider Show dogs as fulfilling a purpose - they have a job. They are trained to do their job well, and to make their owners happy. This can be just as important as Agility, Weight Pulling, Obedience... etc. Especially since a lot of Show dogs also do another activity besides just being show dogs. I think I remember that Riot is also training for Search & Rescue (S&R), and what else SummerRiot? Weren't you also looking into Agility since you didn't want to try Shutzhund with him because of what it could do for his temperment?
So Riot has a job.. he's a show dog, and show dogs not only have to LOOK their best, they have to FEEL their best. If he loses his fur, then I doubt he's feeling very good inside.
I know when Mojo was covered in black heads, he definately didn't act like he was feeling like he was 100% okay. He was careful about where his feet went, and he was pretty itchy. Once the allergic reaction cleared up, he became the bouncy happy dog I have today (except when his hips are bothering him).
But also by Riot losing his fur he loses his job. He won't be able to go do what he's being trained to do - not showing, not S&R, not agility. He won't be the working dog that he's meant to be.
Also SummerRiot will have to take more care when he's outside, possibly even limiting his access to the outside. Because if he goes completely hairless that means no protection against the sun, the insects or the heat. I can't even imagine what that would be like for a dog with Riot's drive to do something.
So, I do see this as a terrible calamity for SummerRiot and Riot.
I also still believe that notes should go around to people, and then a follow up visit with Riot (especially if he does continue to lose his hair) to drive the point home. The children were at fault, and thus the grandparents are at fault for not keeping watch over their children.
But I'm rambling...