They no longer exist and so aren't missing out on any hypothetical pleasures. The pains that they may suffer before dying are a different discussion, and those pains may be heartbreaking
Well said.
The only sense in which the child being dead is bad is in the pain it brings to those still living.
Agreed, however, I'd rephrase that to say:
The only sense in which the child's current nonexistence is bad is in the pain that thinking what could possibly have been brings to those still living. Actual memories that can be remembered with joy are good. Imagining hypothetical what might have beens, while probably a natural outgrowth of grief, does not lead to healing.
I want to add that I have no clue as to how I would react in this scenario, nor do I even really want to entertain the notion. It brings pain. But Epicurus did encourage his students to meditate on death, to dig into it, to internalize the fact that "death is nothing." We all have wrestle with our own mortality as well as every person's we know and love. This is tough stuff everybody, but necessary.