My daughter tells me that "kiddush hashem means not talking loudly in the street." The handout that she brought home from camp says something about always acting like a "bas yisrael."
While these examples seem fine to me, there is something about the popular conception of kiddush hashem that are contrary to the type of lessons you are supposed to be teaching your kids. Too often it is used to exalt appearances over essence, making being a faker and hypocrite into a positive religious act. An example: We tell our kids that giving up your seat on a train or a bus to an old person (Jew or non-Jew) is a "kiddush hashem" because the person will realize how nice Jewish girls and boys are. But if giving your seat to a non-Jew has no independent religious value, isn't doing it to look good deception plain and simple? And if it does have religious value independent of the impression it makes, shouldn't that be the reason it should be done. Or take the case of Jack Abramoff. While many were unwilling to proclaim his acts against halacha, everyone agreed that it was "a big chilul hashem." The same thing happens whenever a guy with a yarmulke is pictured on the cover of the Metro section walking down the courtroom steps after pleading guilty for tax evasion. What does that teach our kids? That appearances are more important than right and wrong? If an act is wrong because it is done publicly than shouldn't it also be wrong if it goes undedected? Was Abramoff's only crime in the eyes of Torah getting caught?
Part of the problem is the undeniable fact that halacha doesn't have much to say about our obligations to gentiles, and what it does have to say is often inconsistent what most would considered enlightened. Invoking the concept of "chillul hashem" is a convenient way to fill in the gaps left by halacha -- if an act seems immoral and wrong to the outside world, then it's by definition is a chillul hashem because it makes Jews and Judaism look bad. But this is a hopeless staryegy because by this logic any value of Western society is automatically incoporated into Jewish law. That can't be right.
What does the Torah have to say about this? Chumash seems full of this sentiment. Moshe repeatedly pleads with God not to punish the Jews because "what will the Egyptians think?" And in Devarim 4:6 Moshe declares that the purpose of the Torah is for the nations to say "Surely this great nation is a wise and understanding people." While this idea seems contrary to modern notions of morality which raises "be true to yourself" as a foremost virtue, it clearly is a concern of the Torah.
The Rambam's discussion of kiddush and chilul hashem is devoted largely to the circumstances under which martydom is required or permitted, he also discusses the type of chillul hashem discussed above:
There are other things included under chillul Hashem when comitted by someone great in Torah and known for his kindness, things for which people murmur about him. Even though they are not sins, he has nevertheless desecrated God's name. For example, one who buys something but does not pay immediately despite having the money and waits for the seller to claim the money from him, or he indulges in frivolity or eating and drinking with ignorant people, or if he speaks unpleasantly with people and does not greet them with a pleasant demeanor, but is rather a quarellsome and angry person, or similar matters, all depending on the person's stature. He must be very exacting with himself and go beyond the strict letter of the law.Clearly, the sin here is based entirely on the the effect of the act on the impressions of others. As the Rambam stresses, the underlying acts in question "are not sins." But a couple of points: first, the acts in question, while not sins, are not religiously desireable - traits like anger and quarrelsomeness are roundly denounced by chazal. Second, the injunction is limited to pious or leaned Jews, those who might be role models to the rest of us. Clearly, the Rambam lends no support to using the idea of chillul hashem as religious PR.