Of course, it's up to you...but if you cosleep, unless you smoke in bed, she's probably pretty safe, unless you have something like an open fire place, where sparks could catch. One of the reasons they say "close fitting" is that there is less oxygen to feed the potential fire. However, the fabrics that they make the flame retardant fabric from eventually lose the chemical layer that retards flame, and then the fabric MELTS to your child's skin...and that causes the need for major skin grafts. So...I'd say that if your child is WITH you and you don't smoke in bed, she's probably pretty safe in a cotton flannel nighty.
That's just my thoughts, with the info I have, though. (My mom is a burn victim, and the fabric she was wearing was synthetic and melted to her skin, causing the skin to come off WITH the fabric when they removed it, really, REALLY terrible.)