The MPAA’s official history of the ratings system, written by the late Jack Valenti, states that M was the predecessor to today’s PG rating:
The book was menacing but not outright scary. There’s been plenty of other kid’s movies with friendly monsters. I too wonder what would happen with a live action Night Kitchen since the boy is stark naked for most of it. Has that one ever been animated?
Yes. Animated in Prague for Scholastic/Weston Woods and narrated by Peter Schickle (P.D.Q. Bach).