I agree with Hg. Face reality...in this economy it is difficult enough to find a decent engineering job with a decent company when you have a full, continuous resume of engineering work, a P.E., or at least several years of experience.
Throw in an absence of any type, whether it's a layoff, a return to school, or family leave and you will find yourself having to explain that absence to a prospective employer, because they WILL ask you about it.
Now factor in the fact that her resume will have just one job as a beginning engineer with roughly a year's experience and then a 5+ year absence. In 5 years, if she can say "I decided to return to school for my graduate degree..." rather than "I took 5 years off to raise my family" I think she would make a much better impression during an interview if she truly decides she wants to return to engineering. The reality is, at least in the U.S., that staying home to raise a child (probably the most important thing she will EVER DO in her life!) is not a good career move. Without more experience, she can't have it "all".
Before anyone blasts either me or Hg, take a minute to think about her situation. There are too many factors involved to be able to say with 100% certainty that she'll have no trouble landing a great job in 5 years. What will the economy be like then? Who knows. Is she in a very competitive field with few openings or is her field growing and jobs are plentiful? Would she be willing to relocate her family to go where the jobs are?
Between now and then, another 5 or 6 years' worth of graduates will be out there, fighting with her for the same entry-level (0-3 yrs experience) jobs. But, with a Master's degree and a good transcript, she'll be giving herself the best of both worlds - time to do what is most important to her, raising her baby, and furthering her education which will definitely give her a "leg up" over the competition once she decides to return to engineering work.
I, myself, am female so don't lump me into some kind of chauvinist pig category--I've lived through this. When I interview for a new job, I feel like the person is wondering if I'm married, if I have kids, will I be leaving to have kids, etc. I don't wear a ring, and I have actually had an interviewer ask me what my plans were in this area, which I don't think is legal but what can you say when you are sitting across a desk from someone that you hope to work for???
I took time off to return to college for a master's. I was also laid off from an engineering job and took 2 years there to open my own business. My advice would be to do what she can to keep her resume full during her time away from engineering. Whether it is school or part-time work somewhere, even at her current company (daycare isn't all bad-a few hours a day really does help a child to learn social skills!), she will need to show a continuing drive to remain in her field or she'll be left behind.