the show suggests that the newborn child of Chief Miles and Keiko O'Brien has been possessed
No it doesn’t. Here’s the original script:
KEIKO: I'm just glad to have you back.
O'BRIEN: If I could've killed that thing inside me... I would have...
KEIKO: I know.
KEIKO: (continuing) We both know.
He exchanges a loving glance with his wife, hugs her and the baby.
No implication of baby-possession there.
The director chose to film this with a slow zoom into Molly’s face, which is I presume what makes you think that possession was implied.
I think the zoom is likely just intended to illustrate the most important thing in the O’Briens’ lives, their daughter, and to give us, the audience, a cute baby close-up to coo over. If possession were intended to be implied, I would have thought they’d at least add some creepy music, like at the end of Conspiracy in season one.
If it helps, following this episode (spoilers)
Molly O’Brien continues to grow up reasonably happily throughout The Next Generation and Deep Space Nine, and at all times acts like a fairly irritating child as opposed to a convicted murder trapped in an infant girl’s body.