True chenille yarn tends to be very finicky. The holes you've seen in store bought items are also, probably, coupled with cases of "worming". Worming is whne short lengths of the yarn creep out of place and form undesirable little lumps around the piece.
Because of this, it can e very hard to use this kind of yarn for baby items which require washability and rough usage. I suggest looking for modified chenille type yarns.
Two examples are Catnap and Toto from Artfibers. You can see them
Notice how they are actually flat ribbons with fluffy edges.
There are other options, including the very affordable TLC Amore, which you can find at most major craft chains.
This is a great option for baby clothes because it is machine washable and available readily and in a wide range of colors. The result is very soft but I've found it hard to knit. Just my 2¢
I hope this helps.