A TES poll earlier this month indicated that one of teachers' favourite choices for the list was Billy Elliot. Yet the film carries a 15-certificate because of its scenes with prolonged swearing.
The event at the Barbican centre in London was held to discuss which films should be included on a list of cinema classics that all young people should see before they turn 14. The institute believes schools should study films in the same way as classic novels.
Cary Bazalgette, head of education at the BFI, was among those who said teachers should show age-restricted films to younger pupils.
"Teachers believe Mr Plod is going to come along and carry them away to the cells if they show a 15-rated film to 14-year-olds but it's not true," she said.
Gianni Zamo, a senior examiner with the British Board of Film Classification (BBFC), admitted that there was a legal "grey area" surrounding schools and video age ratings.
It is an offence to supply a video to a person who is underage, although it is legal for parents to show them to their children.
The BBFC has advised schools against showing films to underage pupils unless there is an educational justification and they have gained permission from parents and the headteacher.
Mr Zamo said he had been contacted by a teacher nine months ago who was sacked for lending school library videos to pupils who were too young to see them. "He thought that he wasn't breaking the law because he was lending the videos to pupils rather than selling them but he was mistaken," he said.
Sean Kaye-Smith, a media studies teacher at Frome community college in Somerset, said he often found it necessary to show scenes from 15-rated films to younger pupils, but had asked for parental permission when he screened The Exorcist II to an A-level set.
Popular children's films voted for by those who attended the debate included ET, The Wizard of Oz, Toy Story and the Japanese-animation Spirited Away.
Other - arguably more challenging - films which were chosen were the Italian Bicycle Thieves, Truffaut's Les Quatre Cent Coups, Ken Loach's Kes, the Iranian Where is the Friend's House? and Charles Laughton's 1955 thriller The Night of the Hunter, which featured Robert Mitchum as a frightening preacher.
However, the most controversial choice seems to be Show Me Love, a 15-rated Danish film about adolescence and lesbianism which was originally titled Fucking Amal.