my son's hair looks like that - sort of. I suggest laying off the shampoo unless the hair is actually dirty. In case of dirt, use a non-sulfate shampoo like JASON's or something super mild. Then put a tiny bit of conditioner in the hair while wet and use your fingers to comb it through until curls start to form. Don't rinse it out and let it dry naturally.
There's a bunch of products on NC.com that are good for babies - the Curls products are good.