Undoubtedly, the future workforce will be impacted by the increasing adoption of generative AI across industries. To prepare students for this evolving landscape, AI must be integrated into undergraduate computer science education. To address this, we explore the redesign of a core computer science course to include experiential learning modules on AI literacy, generative AI tools, and responsible AI usage. In addition, we report on the benefits, challenges, and ethical considerations of using small language models (SLMs) for automated grading. Finally, through an analysis of student engagement, learning outcomes, and perceptions of AI-driven instruction, we provide insights into best practices for responsible AI adoption in academia.