Baby boutiques are, as far as I can tell, mostly the domain of the internet and NYC. They have some in LA, but not like New York. Maybe it's just because now I'm a dad I'm interested in them, but when I was there recently I seemed to see them everywhere. (In my youth I used to see record stores everywhere in NYC. What am I going to see when I'm an old man? Drug stores?)
One I stopped in on my way to Kid-O was Bombalulu's on West 10th. They have the requisite educational toys and cute stuffed animals, but they really excel in children's clothing - especially for girls. There were great t-shirts (like the one we picked up for Madame - pictured above) and all kinds of dresses and accessories. They're even capitalizing on the princess craze and making tutus and other frilly play clothes for girls. According to their website all the clothes are hand-made so it's not cheap, but hey, you are shopping in a baby boutique after all.
Bombalulu's. 101 W. 10th St. NYC (right down the street from Kid-O)