Mamalicious, notice this is an old thread. How is your baby's cradle cap going?
My baby too had VERY VERY BAD cradle cap when she was 2 mths old. I did the leave olive oil then shampoo method as well but find the flakes were not removed as fast as they were forming (probably hers is a very severe case). I modify the method and here it is if you still need it or for anyone who are interested:
(1) Pre-warm olive oil by standing in a dish of hot water (so oil is easily absorbed by flakes)
(2) Massage a liberal amt onto scalp, and leave overnight (2-3hrs wasn't long enough in her case)
(3) Next morning, imperative that you brush flakes off using a baby hair brush (or hairbrush with soft bristles) in direction against hair growth. You will see flakes instantly lifting off scalp. You may have to pick individual flakes off as they may remain attached to hair. I know people would advice you against this, but I used to pick flakes that need a little "persuasion" off. Use discretion, of course, don't pick off those that are still very much attached to scalp.
(4) Shampoo as per normal.
Repeat for couple more nights till everything comes off. I only need to do this 3 times before her scalp was absolutely gorgeous looking. I think it is cruel to leave cradle cap alone - they are very itchy!
My baby used to have this stubborn thick yellow patch on her left forehead that wouldn't come off no matter what, until hair has stopped growing in this area. For this, I religiously massaged olive oil onto the patch 3 times a day for 3-4 days then progressively brushed one flake by another off until skin was smooth again. Good luck!