This happens to be the story of fairy baby delivery. So, when the mommy and daddy fairies love each other very much you should know that the fairy godparent's crowns and wings have to fall off in order for them to make the beautiful love but first they have to poof down to earth and into the parent's house to check on the parents and make sure that their not that stupid enough to enforce love upon their own sibling. If it happens to be like that then the fairies can preform a gender switch as they poof back up to fairy world and poof themselves up a house of their own in order for the ritual to begin where the male has received the seed from the female as they are now Wando and Cosma.
Then it's onto the next house as the fairies grab their wands and poof themselves back to the way that they were born and once again the fairies make sure to check the parents as Cosmo and Wanda are sure that these parents have made the right choice by not enforcing love upon their own sibling Cosmo and Wanda then Poof back up to fairy world and back into their house for the ritual to begin once more. Where this time Cosmo is the one who takes lead as his lover follows his every move. This is how the birth began for fairy babies.
An the answer on how fairies would know about these men and women being related or not. Would rely with exploding pizza if the pizza explodes on Cosmo and Wanda's Faces then Cosmo and Wanda know that the parents have made the right choice by being in love but if the pizza doesn't explode then Cosmo and Wanda do know that the parents are making the wrong choice by being in love with the sibling as they are enforcing love to happen upon themselves.