Unfortunately the only option really is to keep the kids away from the fence telling them that area belongs to the house and is not a place to play. The lady was trying to be nice and letting the children seen the dog they had shown interest in. It would have been better if she had offered as in asked you if you wanted the children to see the puppy but guess she just asummed.

As for the cigarette no different than walking by an outdoor porch where people are smoking - you just keep on walking quickly. If she was at the actual playground then yes it would have been ok to please ask her to put it out while the children were playing or take it to a different part of the park.