aww thanks! do you have a relfector? that would help get the light back to their faces. instead of using your poor wife, what if you used velcro? and hooked it to a wall? then you can bring them forward more get them away from the background, i definitely think she girl needs to be behind the baby. or something you could try and do is have you older daughter sit with her legs completely straight out then with the baby wrapped in a blanket of some kind lay the baby on her legs with her head toward her feet and then give your daughter the book... i seen this somewhere and it was adorable, i am going to assume that it was a composite one shot with someone holding the head, one shot holding something else so the baby is supported not just by the childs legs then composited together, if if you have ps you can do this easily..
Molested cow is right when he says they look unrelated because they are not "interacting" the baby is behind the girl so your eye goes to the book, then the girl, and as an afterthought the baby.
the bed is not so small for the baby, but the thing under her that comes up is to big for this bed, imo, i have a baby bed, it is bigger than yours and i use a pillow, in your case I would just take a baby blanket and fold it up and then wrap that blanket with what you want showing in your picture.
you also mentioned that you wanted the background to cover the whole picture so thats why you placed them they way they did, but if you bring them away from the background and you are catching the end of your background then in ps you can take the rectangle selection tool and hit ctrl +T this puts it into a transform mode and then you can drag it out, since you are using a plain background it should not look streched out, if it does use the clone tool. :-D