Baby Ull, a superwash merino wool, from Dale of Norway, and Lorna's Laces Shepherd Sock will both match the gauge for the old Beehive baby yarns, as will most of the *sock* yarns or fingering weight yarns available. I have made many a baby item in both of these yarns and love both of them. However, Ull is considerably less expensive than some of the others.
Contrary to the belief of many knitters, babies are not allergic to wool, nor are most people, what they are allergic to is the chemicals which may be used to wash and clean the wool, or the harshness of some wools intended for outerwear use. Wool, because it stays warm even when wet, is used extensively for babywear around the world, including by mothers who put their babies in cloth diapers and soaker pants rather than disposable diapers or plastic pants. That said, there are some yarns I would not use for a baby--mohair, because only the first clip of wool on the animal is soft (kid mohair is NOT a first clip) otherwise it will ... more.
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