Permanent Resident married to a Canadian Citizen who overstayed because we had a baby. What's the best thing to do ? Pls advice

First, you should apply for your citizenship as soon as you are eligible. It takes a while (about a year) to get your citizenship. Even with an approved I-130, the wait time for visa availability for spouses of Legal Permanent Residents is something like 5 years currently. In other words an approved I-130 does not mean that your wife is going to get legal permanent residence any time soon. Once you obtain your citizenship, she is no longer subject to numerical visa limitations. This means that once you become a citizen, a visa number will be immediately available to her. At this point, if she leaves the country she is going to be subject to a re-entry ban, the length of which will depend on how long she has been here. Once you become a citizen you may be able to apply for a special process that will allow her to adjust her status here in the US without having to return to Canada (and be banned from re-entry) in conjunction with the I-130 petition. With this type of situation, you really need the help of an experienced immigration attorney who can guide you through the process and really look into any potential problems you may have as well as help you in peparing your petition and gathering the supporting documentation you will need for a successful adjustment of status.