Snaps work fine, especially if you sew a small piece of woven fabric on the inside of the sweater underneath each snap to keep it from pulling out. For a really nice finish, sew strips of grosgrain ribbon along the inside edges before attaching snaps.
I don't know if they still make it, but I used to use something called "snap tape" for sewing bed skirts, pillow tops and similar home deco items. It's a strip of ribbon with snaps attached to it at regular intervals. You just sew on the strip and the snaps are automatically in place.
I've tried Velcro on a handknit sweater and was really unhappy with it. It not only grabbed onto the fabric but it looked thick, ugly and lumpy. And this was a bulky adult sweater. IMO it would be worse on a baby item.
The idea of a bobble and loop is nice......
Nicki Epstein's "Knitted Embellishments" has a section on closures made with i-cord. You'll probably find some good ideas there.