Nothing is said in DD about the baby. In fact, when explaining the final cutscenes in an old topic Marian pointed out that you do not actually see what the Divine One carries out of the dungeon; it could be the baby (which is what most people assumed) or loot.
I couldn't find the story summary (it may have been posted in the old forum), so...
The Divine One took the baby (Damian) to raise as his son, with the help of Zandalor. He also started an organization of Paladins to hunt down the remaining Black Ring members. Everything went fine for about the first 12 years.
One day after Damian failed to return from a ride in the forest, the Divine One went looking for him, and found him in a clearing passed out, after apparently defending himself from an orc attack (burned their hearts out). The paladins saw no trace of orcs entering or leaving the area, and the orc trail ended shortly outside the clearing, suggesting they were teleported in. Afterwards Damian claimed not to remember anything of the attack, and the Divine One told people he fell and hit his head after his horse was spooked by a snake. Returning to the clearing to get rid of the evidence, the Divine One found someone had already removed the orc bodies, blood, footprints and any other evidence that anything had happened there.
Eventually Damian joined the paladins, trained and learned scrying and anything else he could, until he was 15.
Scouting an unfamiliar area for Black Ring activity, the Divine One found a half ruined temple mostly hidden by trees, etc. Exploring, he found that it contained rifts to other places. He cast a protective ward around the temple, and called on some paladins to set up camp nearby, to see if and how anyone was using the temple (particularly the Black Ring). After a couple uneventful weeks, the Divine One returned home, leaving the paladins there.
In his absence, Damian had found himself a slightly older girlfriend, a witch that was teaching him minor tricks and protective spells. He was also skipping training and chores, since he felt the paladins had nothing left to teach him. The Divine One got Damian to invite his girlfriend over for supper, which seemed to go well. Afterwards, the Divine One heard them arguing, but could not make out the words.
After Damian failed to return to the barracks that night or the next day, the Divine One went looking for him at his girlfriend's place. Nobody was there, so he took the liberty of lockpicking the door and searching inside. Amongst some burn papers in the fireplace, he found evidence of a link to an evil Black Ring necromancer he had killed. He sent paladins to search for Damian and the girl.
They brought in the girl, with some casualties in the process, but did not find Damian. She was the daughter of the necromancer that had been ordered by the Black Ring to perform certain experiments, on pain of death. She felt she had to help her father with those experiments, and was also ordered by the Black Ring to tell Damian about his heritage, and to bring him under their control. However, she hated the Black Ring for reducing her father from a powerful necromancer to a mere servant, and felt they were too petty to even be allowed to worship the Damned One. She said she did not tell Damian about his past, and that their fight was due to him still being young, that he was scared of the power she was working to awaken in him and develop.
Anyway, being a confirmed murderer and Black Ring member, she was executed by the Divine One. Of course att the end of the procedure Damian walked into the barracks just in time to see the deathblow, after which he fled.
After no trace of Damian was found for awhile, the Divine One assumed he would probably want revenge, especially if he learned of his past. He took most of the paladins and moved to the camp near the temple, in order to draw Damian out. It worked, and he showed up at the head of a Black Ring army. While the two armies fought, the Divine One went after Damian, and then lead him back to the temple. Once inside, he zapped Damian with some divine magic and tackled him through a rift, binding him and knocking him out. He carried Damian an hour away from the rift, and then cast a spell on him, so that even if he were to somehow find his way back to the rift, that he would not be able to leave unless the Divine One, or one of his followers, wanted him to be able to do so.
When Damian woke, he was on Nemisis with no memory of his past (for awhile) except his name and where he came from. The species there were Raanaar; the elders could create rifts, and attempted to bring Damian home, but he could not leave. They took him into their academy, intending it to be just until they figured out what the problem was, and he started studying there, eventually learning how to create rifts. However, his attempts to leave Nemisis through his own rifts fail just like they had before. This caused a tantrum, and Damian became increasingly angry, depressed, cruel, and eventually a genocidal megalomaniac.
There is a little more in the novella, which is also described a bit more briefly throughout Beyond Divinity (mostly in the second half).
