I read the Prydain books around 4th grade or so -- I don't remember how old I was when somebody gave me a set of the Narnia books, but it was definitely while I was still in elementary school, and all the religious allegory sailed *whooooosh* right past me. But I did always find The Last Battle and The Magician's Nephew a lot less satisfying than the other books.

(I didn't pick up on any of the religious or autobiographical elements in Tolkien the first few times either, since I started reading those so young -- it was really fascinating going through those all over again in my teens for the first time after I'd read the biographies and some WWI history and so forth.)