It's Not Polite to Stare?

So, I had a very uncomfortable moment yesterday at the taco place. I was standing in line, a long line as the pace is new and people are in the "it's new, whoopie!" stage. I am in line with my 3 year old in my arms. I look ahead and there is a little person in front of us. I used to say midget with no malicious intents but was told it was derogatory. Theres a 70 people in the place and of course I have to be put in the perfect storm situation. Anyway, there's a little person and this guy is super happy to be at this new taco place and he wants to let me know. He starts talking to me. Immediately my daughters eyes lock on this guy and I mean LOCK. It becomes even more comfortable than it was when it was just me and him. I'm six two, so I am already in the taller bracket. I'm leaning down like Santa Claus asking a child what he wants for Christmas. Now I have to come up with things to keep my daughter distracted and to break her bionic stare. Then, then, she says "look daddy, baby man". What do you do?! My heart sank and and my stomach knotted up. "He's funny" she says. I am coughing and laughing uncomfortably. The guy didn't comment, but heard it as clear as day. That could have been like the sixth time that day that guy has had a similar situation. Luckily the excitement of the new taco place had the little man distracted enough to not hear half of my daughter's observations. (Bill Cosby voice) Kids say the darndest things.