Not sure what, if any, stretch you'd get in the blanket binding if you're looking to buy pkg'd product. Another possibility is to make your own 'tape/binding.' Bias would give you perhaps bit more elasticity that ContiKnitter mentioned for the knit fabric. I've done this on pillows and it's worked quite well. (I'd attach the binding by hand with a blind stitch.) If desired, you could also back the piece which would further stabilize it from bowing (make sure to tack) BUT some don't always want to cover up 50% of their work. BTW, there are some blogs that have knitted baby blankets with backing, binding.