Honestly, I don't think any kid is good looking, so I rarely would comment on how a kid looks. I might make a comment to my wife as the kid and parent walks away, like "what an ugly kid." But, my opinion on that to the parent would be none of their business. As to whether they are smart or not... I'm not giving out IQ tests.
I don't feel compelled to lie to make someone feel better, but I don't have to put them down either. Hell, why am I talking to these dumb ugly kids anyways?
But, Mark Twain weighed in on the subject...
On The Decay Of The Art Of Lying... he promoted lying to prevent people from feeling bad, and/or to manipulate a situation. Funny stuff, worth a read.