i doubt very much that a vet would have said this. If they did then i would be contemplating getting in touch with the royal college about them.
It is well known in cat behaviour circles that hitting is not a useful way of disciplining a cat, let alone cruel. The best way is with a water spray or even a can of air (like you use for cleaning computer. A quick squirt as the cat is getting too close is better than one as the cat is on the baby as it will teach the cat what is the acceptable distance to be near baby.
I think your neighbour should also use basic common sense and not leave baby and kitten alone unsupervised and make sure the kitten does not have access to the babies bedroom.
If she cannot handle the situation then it would be better to rehome the kitten before it is too shit scared of people to have a chance of finding another home
the only thing you can do that i can think of is speak to the RSPCA. they are the only people who can intervene if you think the kitten is being physically harmed.
Unless you can suggest to your neighbour that it may be better to rehome the kitten then the rspca may be the only way. Hopefully they may be able to give you advise or if you have pets yourself you could speak to your vets and see what they can suggest. I am sure that the other animal charities only deal with animals voluntarily given up for adoption
Maybe advise her about idea of water spray as thats whats commonly used, some people do have silly ideas though and she's probably just saying the vet advised so she doesn't look to be doing any wrong. Have heard of people (not vets!!) say tap on the nose to stop kittens doing things and although its not something I would do or advise doing, I wouldn't report someone for that. Is that maybe what she means?