California Proposition 65 - everything causes cancer except that strange orange / yellow blob in the sky - even the cream you apply to stop getting sunburnt (thanks to its preservatives).

Yes new research offers insight in to the hazards from substances we experience in every day life, and then some researcher finds an "alternative" perspective (remember the MMR vaccine debacle?) - personally I favour the concept that allergies & asthma have followed an increasing trend as society chases the advertisers "germ free" environment ... what were the narrators closing words at the end of "H G Wells - War of the Worlds"? Oh and "kills 99.9%" means sufficient germs left behind to cause the upset stomach, food poisoning and all those other things you have been conditioned to be afraid of.

In respect of newborns we replaced the cot mattress at the height of the scare about Sudden Infant Death Syndrome possible association with fire retardants in cot mattresses - no effect on my exposed first born now an expensive 21 year old nor the "protected" second born just about to head out to the pub.

The concern with VOC's is primarily aimed at the professional (decorator) whose job entails repeated and persistent exposure to these compounds throughout their working life.

Given the question I suspect you are discussing your acquaintances first born (tell them it gets easier with the second and they can move beyond the paranoia).

If the above statement is correct, how can the baby develop asthma from this cause/exposure?

With paint used indoors I would be much more concerned about water based paints. These generally contain a biocide to prevent bacterial spoilage. The most common one is MCI/MI (methylchlorosiothiazolinone/methylisothiazolinone). This will remain in the paint as it dries and continue to be released for some considerable time. In one study they showed a release of MCI/MI at a significant level 240 hours after the paint had been applied!
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“MCI/MI is an important allergen for the hands and face, and it may also cause contact urticaria and airborne contact dermatitis. The airborne contact dermatitis may appear in the face of sensitized individuals who stay in newly painted rooms, and the diagnosis is easily missed unless specifically considered.”
Duus Johansen J, Frosch PJ, Lepoittevin J-P, Contact Dermatitis, 2011, Springer-Verlag, ISBN 978-3-642-03826-6
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The incidence of allergic contact dermatitis due to MCI/MI (a commonly used formaldehyde releaser) is increasing at a rate that is causing some dermatologists considerable concern.
Chris