I had a cat that used to like to suckle on the buttons on my shirt... lol... I don't mind the kneading until the claws start to draw blood (my big outdoor cat can really dig those claws in when purring, so when it gets to that point I try to discourage it. Usually a little yelp on my part makes him stop clawing without getting spooked).
Cats, like most beings, generally respond best to positive reinforcement.