I think Ponyo should feel grateful that the fussy baby didn't get any more scenes, because he very well could have run away with the picture. This scene was very popular with audiences; that initial closeup of Baby Schnooks drew big laughs every time.
If Ponyo were an American production, Baby Schnooks would definitely be spun off into his own running franchise, like that neurotic meekrat from the Ice Age series. He wouldn't even have to do anything; just send him on location and let him quietly sulk. Baby Schnooks goes to the health care debate! Baby Schnooks goes to the World Series! Baby Schnooks versus Jared the Subway Guy in a stare-down battle royale!
I think we may be looking at the next Keyboard Cat, folks.
Seriously, though, this is one of the great "silent" scenes in Ponyo. There's an entire conversation taking place between Ponyo and the fussy baby without a single word being spoken. Even body language is kept to a bare minimum. But in their long stares, there is a connection taking place. What are they thinking? Who knows. It's a mystery in a movie loaded with such little mysteries.
This reminds me of a dream I had earlier this summer, where I was playing with a brown lab retriever, and we saw something funny. I can't remember, maybe a squirrel stumbling around or something. But the dog and I both smiled and laughed, and as we looked into one another's eyes, an almost mystical connection took place. For this brief shining moment, we knew what the other was thinking. We were meeting as equals and we never made a sound.
When Ponyo and Sosuke sail away in their toy boat, the baby starts crying and, well, being fussy. Ponyo then rushes back in her Kermit the Frog form, smooshes and hugs Baby Schnooks, then hops away. The Disney dub inserts an "explanation" into this moment - "Aww, you have a cold!" - but no such lines are spoken in the Japanese soundtrack. The baby is just being fussy. I think this moment plays very differently when you see it in the original language, and I do wish Disney had resisted the tempation to rationalize everything.