As usual, Canon's IXUS 40 should produce good photo quality. But the FX7 is equiped with IS (image stabilizer) which assist a lot in low light environment. The one major drawback of FX7 i heard from the web is its battary run out very shortly (of course you can purchase a spare one as 2nd battary).
my own opinion is resolution is not that important, i.e. a DC with 4M or 5M or 6M make no different for daily usage.
Yes, response time is really important for taking photo for baby. That's why i recommended W1, i have hand on experience on this DC and i feel the speed of it is really fast!
You may go to the shop like Broadway/Fortress to try to compare the response time by yourself. Ask the shop keeper to show you the 2 models and test it by yourself and you will know which one is better!