When I found that Woolly Worm inside my house the other day, I did pick it up gently and set it down on the TV stand for my daughters to observe and see. I was sure to keep him up here to avoid anyone accidentally stepping on him until he could be released to the safety of outside.
Woolly Worms are safe to touch when they are brown and black like the one I took a picture of here. There is an up close view of it in my Woolly Worms* post.
They do usually curl up into a ball when touched though! Abigail got a huge kick out of our little guy curling up to play dead when she gently poked him. She did this a number of times.
I do think its important to allow kids the opportunity to learn about and be with a variety of animals, when its able to be done safely for all. I think it helps develop a sense of care and compassion to see there are more life forms that have value than just humans!
Woolly Worms : a little more information!