First of all, OP is correct that the pesticides used in spraying (by companies like MS) have been linked to infertility, learning and developmental delays, and autism. There is a reason those issues are on the rise in the U.S.
Impact of Prenatal Exposure to Piperonyl Butoxide and Permethrin on 36-Month Neurodevelopment:
http://www.citeulike.org/user/alexhakkinen/article/10158369
Second, the reason kids are reacting so strongly to mosquito bites is twofold:
1. Other chemicals (yep, more toxic chemicals!) like triclosan (a common antibacterial agent) are in EVERYTHING nowadays (toothpaste, soap, deodorant, hand sanitizer, impregnated into clothing, etc). Triclosan has been shown to increase the risk of developing allergies (as well as other scary effects like weakening heart muscles and lowering resistance to hormone disruptors like BPA). I'll bet your kids have significant exposure, like pretty much all Americans.
2. Less exposure to mosquito bites increases the risk that the immune system will categorize bites as a threat and cause a big histaminergic/inflammatory response.
P.S. I have a degree in Chem, and it disgusts me that the FDA and EPA allow so many chemicals to be used in our country without strict safety testing. This policy of "safe until proven dangerous" is what's to blame for the rise in MANY illnesses and disorders.