Elementary and middle school students still can't tell right from wrong or reality from fiction.
Literal
Elementary-middle students [topic-なんて], still good-evil [possessive-の] distinction [also-も], reality [and-と] virtual [possessive-の] distinction [also-も] not-attach.
小中学生 'elementary and middle school students.' 善悪の見分け 'distinction between good and evil' and 現実と仮想の見分け 'distinction between reality and virtual/fiction.' つかない means 'can't achieve/attach' — 見分けがつかない 'can't tell the difference.' なんて adds a dismissive tone: 'kids like that, well...'