Originally Posted by spsawant

Anyway, to answer OP's question: I was in an exact same situation 2 weeks ago. I travelled to Mexico with my family (a Lap child, 6 yr old kid and wife). I had booked my wife's and 6 yr old's ticket in First Class using miles. I had booked my ticket in Coach and used my EXP status to upgrade my ticket. The Lap child was attached to my ticket and I paid 10% of my coach fare + Taxes for my lapchild. I got upgraded to First Class, 2 days before departure.
The Gate Agent did not collect any additional fare. Same thing on the return. I was upgraded to First Class and we all 4 travelled in First Class Cabin without any problem.

Thus my advice to OP:
1. Book a Lapchild ticket for your kid asap, before you get upgraded. That way you will only pay 10% of the coach fare and not 10% of First/Business.
2. From my personal experience, you will not have any issues getting upgraded. I got upgraded twice and so can safely say the same.