I suspect that the teacher-parent’s personality has much to do with how well it works to have his/her own child as a student. I had all five of my children in secondary classes for multiple years. For the most part, being aware of the fact that this student was my son/daughter was a cognitive experience, meaning that they melted into the class as a student.
Two practical suggestions: Know when to appropriately switch between teacher and parent roles as you relate to them. Specifically, don’t try to use them as an “embedded reporter” in the class to collect intelligence for you in classroom management matters. Also, treat them openly and fairly in classroom activities–don’t treat them more distantly than you do your other students.