Hmm.. I'm torn between the two. I can see Jocelyn's point of view: Your whole life is fighting and your husband is the hitler of the other reality that the mundanes are blind about. All you would want to do is get away. Also, you have to think, a five year old seeing fariies in the park and pointing them out to friends? It wouldn't look so good to Jocelyn or Clary. Jocelyn could instruct her, but do five year olds always listen or have the way to think rationally?
I think that she should have told Clary when she was older. Don't know how'd that work with the block, and that Clary would have gone angsty with 'why didn't you tell me', but eventually she'd cool down and accept it. But I would have told her before the age she found out. Sixteen is too old.
Another thing I was thinking...
In CoA Clary has that dream of her and her mom on the beach, and then she wakes up with the rune on her wrist. Do you think that Clary drew is cubconciously on her wrist, or that Jocelyn is kind of in a 'spiritual state of coma' where she cna contact Clary through dreams and so on... Just a random thought.