Re: How to instill your values in children
As other posters said most children will emulate what they are exposed to by their parents and others. It doesn't have to be a constant stream of "this is the way that we do things because we are muslim and they are kaffir", just a simple explanation such as good people are always truthful, or muslims don't eat pork. Not everything must be or should be tied to a religious explanation, a simple "that is not how a nice person behaves" is sufficient when scolding, or "Allah doesn't like that behavior". Parents of kids who make nasty comments about other religions or races do so because they pick up those attitudes from the parents. It is simple enough to impart your own values without denigrating those of anyone around you. If you are proud of your faith and don't make apologies for what you believe, your kids will follow suit.
I am always surprised when I hear stories of kids being bullied at school, and I think that a lot of this has to do with their home environment. My kids have always had close non-muslim friends, and those friends have always come to our homes, some have become like my own children. There is an understanding that they have different beliefs, but it has never been a big deal. My daughters friends always beg for lenghas and bangles when we go to Pakistan, and some have even been to the mosque with us (along with their parents)
I believe that parents who have children who are ostracized at school for being muslim or Pakistani are usually the same ones who never let their kids have non-muslim friends over, don't let them associate with non-muslims, and go on and on about "kaffirs". The blame falls squarely on the parents, and the kids suffer as a result.
As for hijab, I have to disagree with a previous poster. I have never required my children to wear hijab outside of the home, aside from Islamic school, but my oldest daughter requested on her own. She has seen my and many of my friends proudly wearing hijab, and I knew that it was natural that she would eventually want to emulate that. Forcing the issue before a girl is ready usually backfires and results in rebellion.