Great placement of the light blue print.
Of the three options, I would opt for #3...just resew that seam a little further in, your right, it won't likely be noticed. I would however probably reinforce the hole before I resewed the seam. You could put a piece of fabric or stabilizer underneath and darn over it, or use some woven fusible and then darn it a bit. Just to be certain that the hole doesn't continue to tear or rip and then grow out of the seam and cause troubles after it's gifted. As a baby quilt it's likely to be washed more often than other quilts and you don't want the new baby's parents to have to deal with that! ;)
AllPatchedUp Oh thanks for the reassurrance :D.. This choise seemed the most obvious the more I thought about it!
Reinforcing the hole is a good idea! Thanks! :D
You're welcome. I couldn't see pulling things apart if you have the whole top together and that little bit of a seam isn't really going to be noticed. Good luck with it!! :)