I’m well aware of flag etiquette, but I have no problem with the photo. The flag was not used as a diaper, a wipe, or bib. It was used in respectful artistic expression.
I agree with those who see no real problem with it. While there is the “technical violation” of the flag rules, I like the symbolism of the photo. There is nothing disrespectful about it and promotes the idea that the child is born into, and protected by, the freedoms the flag represents.