T.M.
Being an "animal lover" and into "animal rights" you must certainly understand that stress brings out other, often undesirable, behaviors in domesticated animals. Tossing the cat aside because of this behavior will just guarantee it ends up abused by new angry owners, or euthanized.
Whether or not the cat peed or sprayed you can get rid of the odor without harming your sofa by using Woolite with Oxyclean. Blue spray bottle, it eats all organic matter, such as the urine. It won't bleach your leather. I have also had success in the past using a mixture of hydrogen peroxide and water in a spray bottle...same basic theory as with oxyclean. The peroxide will bubble if there is organic matter present and will basically eat it. I would start with 1 part peroxide, 2-3 parts water though so it doesn't change the color of the couch. Test in a hidden area first of course.
The cat should first and foremost be checked for any medical condition causing this, such as a urinary infection. After that, you will have to look at stressors in the house. Is the baby scaring the cat because he's not used to children? Does the cat no longer have a safe spot to rest and be left alone because the new surroundings have more people in it? Getting rid of the cat just passes the problem along to someone else and increases the cat's chances of a very negative outcome.
I agree that enclosing him for a while is a good idea and will allow him to acclimate better while feeling safer.