Child crying, I'm confused why.

Did she see Dad kissing someone else? Should be a red memory in the memory panel that might shed some light on it.

Ah, reading it through again, I see the problem.

There is this detail that when a child sees their parent cheating on their spouse, they'll cry and notify the spouse. You have shared that Don is married to someone else. That's the only thing the game cares about here (to be inclusive to step-parents I guess). Despite the fact that these are both her parents, what signal the game gives is "Uh oh, Don is married to someone else, he is having an affair" and causes the child to act like this.

Some details in The Sims 2 are really complex, which can just backfire if you have such complex situations. So yes, the problem is kissing her mom just because that's Don (dad) cheating on his spouse.
Though what's Nina's marital status? Is she married or single? Seeing that she got -40 with Don, I'll guess Don is married and Nina is single, correct?

From her view, she doesn't get it. She's a child.

No bad or red memories. Don is married to someone else (that's why he doesn't live with them) but Kat technically shouldn't care about that. She hasn't been around Don and she just aged to a child. You'd think she'd be happy Don was kissing her mom. I do also experience this with Alexander Goth with Mortimer but that's understandable because Mortimer is kissing someone who isn't his mom, but Don is her dad so idk.

Yes, Nina is single and Don is married. I wish it didn't matter that Don is married or not and that she'd just be happy her parents are in love :(