Baby to Monarch does make sense if the rumours I've heard about the new Monarch plan are to believed. Not for the aircraft, but for the crews.
As for BA going for Mainline. I just can't see it for a variety of reasons. My guess (and it's a mildly educated one) is that Regional is obviously going, Baby will be VERY closely following and the bmi plan will be to slim the company down massively and almost start from scratch. Nothing else makes any sense from a Lufthansa perspective.