Personally, I don't think sight words versus phonics is an issue for very young children. Very briefly and overly simplistically, this focuses on the idea of "real literature" over books constructed from a carefully-controlled list of words that increase in phonetic difficulty. Some children do slightly better with a sight word approach (generally those who learn to read when very young), and some do better with a more phonics based approach (generally those who learn to read a bit older), but after both are reading, neither is really "better".
Most children and teachers use both approaches eventually anyway. For example, even if you start by sounding out a word phonetically, it should eventually become automatically recognizable, and even if you know a word by sight first, you eventually learn to decode the letters/phonemes in it and apply those phonemes to similar words.
For babies, I would think the sight word/whole language approach is generally more appropriate. Mostly because the books in a whole language approach are more content-rich and conceptually interesting. The main things a child is likely to learn as a baby about books (my 1 year old seems to enjoy reading and has learned these facts so far) are that books have pages, pictures, and words; the pages can be turned; and in the next year to two, probably that the words tell mommy what to say for each page.
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