I've got one cat and I don't let her sleep in my DD's cot. I really don't think she would smother her, but I think its one of those things where its better to be safe than sorry.

Otherwise, the cat goes where she pleases and sleeps pressed up alongside my DD if I she is on my knee. There is a ton of research out there that shows that children raised in houses with pets, but specifically cats, generally grow up to have far fewer allergies than children in a pet-free home.