I'm an adult but have a 6-year-old daughter who likes to play my character with me, so I've selected the protected chat option. I feel bad, though, when another player says something that just comes up as "...," and I don't know how to respond; I feel rude! Is there a way to say "I'm sorry, I can't see what you're saying"?
No need to feel rude. Other players can see that you have menu chat by the symbol next to your name. Most will understand that this means you can't read everything they say.
Under the "oops, sorry" section of menu chat options is the selection "Sorry, I don't have Text Chat." You can use that to explain.