I've been reviewing IRS Publication 503 regrading allowable Dependent Care expenses and don't quite get one thing in particular.

Under 'Expenses Not for Care' (subheading of 'Care for a Qualifying Person') the publication states 'Expenses to attend 1st grade or higher are not expenses for care.'

This means to me that expenses to attend kindergarten would be allowable.

However, under example #2 it says that money paid for kindergarten is not allowable,only the portion of money paid for the after-school program.

Is this contradictory or am I not getting it?

You might want to check the regulations under Section 44 (I think that is the right section). They might clarify this question, and they are stronger authority than the publication.