As long as all they do is sell "traditional street party bits", I see nothing wrong with it at all, and if Buckingham Palace doesn't like it, too bad. It would be different if they were selling bunting with family photos of Kate on it, or flogging those notorious condoms, but if all they are selling is what every other similar sort of business is selling and it's not tasteless I think they'd be silly not to. They seem to be a close family and I suspect they have discussed it with Kate and William anyway. William seems to be the sort of fellow who would tell them to proceed with business as usual.
This is their daughter's wedding, after all. They are as much a part of the event as the RF, and should not be expected to act to their financial detriment merely because someone at Buckingham Palace, even if that that person is the Queen, doesn't like it. I don't see the Queen making any special effort to embrace the Middleton family as a whole. It is only Kate who is becoming a member of the RF on the 29th April. Life will go on for the rest of them pretty much as usual after then.