While doing the Fetching Dinner quest with Rxezt, I found the craddle to be devoid of the baby item. Upon returning to the quest giver, I did not have a failure dialogue choice, instead the only choice was to go back and fetch it. I have finished the quest successfuly last night, and the only difference between then and now is that I chose to attack the father outright instead of trying to convince him to hand over the baby. Last time I failed to convince him, and killed him.
Like any container, sometimes the "chest" that contains the baby breaks and no longer provides anything.
Probably the only solution would be to have the baby be a drop by the mother instead of recovered from a container.