I'm agnostic and my wife was raised Catholic. While not a regular church-goer or strict practitioner by any means, I know her religion does mean more to her than my lack of one means to me. Our kids are being raised Catholic but their exposure to me will obviously temper whatever they're taught in CCD or on the rare occasion they do go to church. The church they attend is viewed by the other churches as not being stringent enough, which is just fine by me.
I figure if nothing else, at least they'll be able to get married in a church if that's important to them. I know getting married in my parents' backyard by a Justice of the Peace caused some friction but it was our only choice. Well, not only. But most logical.
As well as being a Godfather or Godmother if the opportunity presents itself. (My youngest actually has two Godmothers because none of my immediate family members or remaining friends are Catholic, nevermind religious, and after 4 kids we ran out of guys.)
I don't think being raised in a religion is bad in and of itself as long as their minds remain open to other beliefs or possibilities. Of course, parents are the primary drivers of that.