I think the thing about lanolin is some people think it might trigger a wool allergy. I dunno. I personally wouldn't hesitate to use it because of safety/health issues, but IMO it is sticky and that would annoy me.
Personally, my first choice would be a dab of unrefined organic coconut oil (we use that for all our kids, for their occasional eczema issues). If you worry about coconut allergies, or if allergies run in your family, you might prefer olive oil. Either one should work great....I'd massage it all over their body/face once every day or so, and rub a dab on the chapped spots (or the drool zone, LOL!) several times a day.
And of course, encourage the baby to nurse even more often, because chapped lips often mean they need more fluids!