I think most people would understand that kids grow out of clothes pretty quickly, and that something needs to be done with the clothes that no longer fit. It's either throw them out (bit of a waste with brand new clothes), sell them, or give them to charity. I happily give good condition used clothes to charity, but brand new and "brand name" clothes I tend to hold onto with the intention of selling (when I get the time lol). I think when you have kids of your own it's probably easier to understand how some clothes just never end up getting used due to sizing and the wrong season, so I wouldn't get upset if something I gifted someone was getting sold unused. I would just assume that unfortunately the sizing and season didn't match.

In the case of your friend, I would just give her the clothes and let her know that unfortunately the season and sizing was wrong for your kids, but that you loved them so much you wanted them to go to someone that would love them as much as you, and that's why you were selling them. Plus, it would give you kids some piggy bank money.