Yet when the mother replies that it's a boy or it's a girl, or if she tells you the name, you'd switch to 'he' or 'she'. And when the same uncertainty factor is at work with adults, with gender-neutral words like e.g. 'teacher', you wouldn't use 'it' at all. So this doesn't explain how it would make sense to refer to Aran'gar as 'it'.
Part of this baby thing is a purely grammatical issue which depends on the language you're speaking. In English, the nouns 'baby' and also 'child' are neuter; you would say e.g. 'the baby/child smiles because it's happy'. But most other words describing people, like 'teacher', are not grammatically neuter, even though they are gender-neutral and can be used for men or women. Nobody will ever write 'the teacher smiles because it's happy'. Whereas in my native Dutch, the word for 'child' is also neuter, so same thing there, but the word for 'baby' is actually masculine. Hence, you'd say 'the baby smiles because he's happy', without needing to know if the baby is actually a boy or a girl. As long as the second phrase is referring back to the noun 'baby', the pronoun following will depend on the grammatical gender of the noun, so 'he' in Dutch, but 'it' in English.
But whether in Dutch or in English, if there is no earlier noun to which you are grammatically bound, and you're simply talking about a particular baby or child, you'd go with 'he' or 'she'.
And then in languages like Spanish or French, there are no neuter nouns or pronouns in any case, only masculine and feminine ones, which leads to an entirely different controversy about whether or not it's appropriate to use the masculine as a default option in cases of unknown gender, such as foetuses, or with mixed-gender groups.
Which would be precisely why it bothers me and fionwe to see people referred to by 'it'. As you say, it dehumanizes them, makes them seem less like a person. And although nobody cares about a fictional (and extremely reprehensible) character like Aran'gar, if Cannoli is using that pronoun in this case, it leads one to assume he'd also use it in others.