I've got both- the SB600 and the 35 f/1.8.
Definitely go for the lens. Until you've really loooked into lighting in photography- and I don't mean just bouncing off the ceiling- the flash isn't going to help you as much. The 35 does have a bit of barrel distortion, but its a really quick (read: 45 seconds) fix in PS.
Since you have the D90 and it'll autofocus with the 50 and the 35, I'll say go for the 50. It's cheaper and arguably better, but there is the chance that it may be a bit too long (IMHO, I don't think it'd be too long if you're shooting a newborn.)
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