Unless the students were handling the sick infant, it's doubtful they were at risk. And I am telling you from personal experience, those students will pass around every flu, cold and other virus over the next 9 months, sick baby or no.
The only person put at additional risk was the TA, who graciously tried to occupy the baby. And even she will be fine if she washed her hands afterward without touching her mouth or eyes.
I think we need to keep in mind that this was a new teacher's first day on the job. She's not proposing to bring her child to class on a regular basis. She was in a bind and she improvised as best she could with little notice.
When I was teaching, my department had a strict "no visitors" policy for core courses. Yet every once in awhile, a student would have a visitor (usually a parent) and no place to put that visitor during a 3-hour class. So I would violate policy and allow the parent to sit in on the class. I didn't allow it to become a habit (and obviously there was no breastfeeding), but special circumstances sometimes call for a bending of the rules.
Unless one finds breast-feeding "yucky" or pornographic, I just don't see the harm. If a student was distracted for the few minutes the breastfeeding took place, why what a wonderful opportunity for the student to reflect on WHY s/he was distracted and what s/he might do to become more comfortable with the basic processes of life!
Students texting and tweeting during class is a MUCH BIGGER PROBLEM and should be strictly forbidden. My students knew the quickest way to get humiliated in public was to pull out a cell phone.