Is this for now or for January? You made the decision already that PT for under 2 yrs old doesn't work for you. I would tell them that you could still continue to accommodate the older child on a PT basis but they would need to find alternative care for the baby. Let them know that the spot is theirs until you find someone (of January if that is what you decided) and then start looking to fill BOTH spots now because chances are they will pull both.