Well, I think a baby that dies just dies. The end. Very sad, but just the way it is.
And when it's an infant dying at birth, the reason it's sad is because it's so traumatic for the parents and others whose hopes and expectations for the life-to-be are so cruelly dashed. I don't believe it's sad for the infant, because the infant has not yet formed a mind, which is something that only emerges from the interaction of an organism with the world.
But let's go with my boyfriend's worldview for a minute, since he believes in reincarnation, and we've discussed it a number of times.
According to him, a baby that dies (or anything that dies) releases its spirit and re-joins the collective spiritual consciousness of the world. Some time later (as "time," the way we understand it, has no meaning in the spirit world), the spirit comes into something else that is being born. It could be another human baby, an animal, a plant, or whatever. It could happen instantaneously (again, from our human perspective of time), or it could happen thousands of years later. Spirits do not have "lives" and singular consciousness during that period, they are just part of a collective whole.
While there are still some obvious logical problems with this framework, it makes a hell of a lot more sense than spirit primary schools and backwards aging and whatever else you're proposing. I find your view needlessly complicated, and I almost wonder if you are joking.
Your boyfriend's worldview is a kind of free-form version of the reincarnation narrative. Most versions (including in the Asian cultures that originated the idea) are somewhere in between your boyfriend's and Scorpion's spirit-world-as-afterlife-movie-set view. (You know, all those movies and shows, like RIPD and Six Feet Under and The Magicians and Harry Potter, where the afterlife looks and works like a train station, or a gigantic office floor, or some other way of depicting it as ironically mundane as possible. Usually with the caveat, "this is just how it appears to you in your limited mind.")
So, most would agree with Scorpion that the trend in incarnations is purposeful and generally progressive; a spirit incarnated in human form might (in most versions if not in Scorpion's) have previously been incarnated in animal form but would not go back to such a form unless perhaps it screwed up incredibly badly; that would be like having to be sent back to a remedial class. But they'd agree with your boyfriend that spirits in the spirit world do not have spirit bodies that are just like humans except for being sexless; they're higher beings with astral and mental bodies (the etheric body being left behind shortly after the material one); they don't drive spirit cars or work at spirit jobs or attend spirit grade schools.
ETA - At any rate, I'm glad you're feeling okay mentally now, and that you're so willing to talk about your experiences. That is valuable.
Me too. For me Scorpion's always a pleasure to talk to, no matter how much we disagree.