The Otaku SM community is over saturated with Chibis. The Phenomenon that is Chibi is problematic storyline wise, much like Knights are. I'm however loath to outright ban something that IS in cannon.

This is what I've come up with. It is consistent with, but not supported by cannon. So I'm open to other ideas if someone can think up something that fits better.

1) Both Senshi and Non-Senshi have star seeds. The difference is the amount of power contained in these seeds. Normal Seeds turn black the moment they are exposed, Senshi seeds however can exist outside of the body AND give their owners Senshi powers.
2) Senshi's Star Seeds vary in power. None however are as, or more powerfull then Sailor Moons.
3) Star seeds powerfull enough to spawn Chibi's are rare.
4) One Senshi per "group" can have a star seed powerfull enough to do this. Ussually less then one per group. Groups less then 9 are unlikely to harbor such a seed.
5) These star seeds imbue the normal star seeds of offspring with power, which circumstances allowing, can lead to a Chibi-Senshi. The seeds of Chibis resemble their parents, but pale in power.
6) These Chibi's are not as powerfull as a normal senshi, although they can increase their power by borrowing their parents artifacts or by any other normal "power up" story hook. More often they augment their poor attack skills with some story hook that demands their presence in combat. (think the pegasis storyline) At least untill latter in life after much training.
7.) While Chibis enjoy most of the powers/traits of their parents, much power must be obtained for them to be able to reincarnate like their parents do. If they can manage to do that, it will take many incarnations of training and power acquisition to be able to create chibis of their own.