Baby vicks. There is a special formulation for babies and kiddos. Try putting it on the bottoms of their feet and then putting on thin socks so they don't get it everywhere. There is also a nice night-light/vaporizer that uses little medicated pads to spread the vapors around the room.
Probably. My mother was a huge vicks fan; anytime my nose was close to running, i got dipped in a big vat of vicks and slid into bed like a salami -- and i'm still here, so i suppose it's okay. Whether or not it actually helped, or just made my mom feel better, is another question.
Archaic practice. The native Americans used pine pitch to scent the steam in their sweat lodges.Vicks perpetuates the process and for older kids/adults it may have benefit.The tiny nostrils of babies will react to any fragrance as they would with smoke or dust.It produces nasal congestion and increases work of breathing. I never recommend it in infants, no mater what mom or grandma did.