Ive only adopted a handful of times but is it possible to adopt babies? I seem to only remember adopting toddlers.

I know you can make toddlers on CAS and have them get taken away by the social worker so they're the first ones you adopt but can I age down the toddler to a baby somehow?
Do they keep their relationships to siblings or do they only have their new family in their tree?

Yes, you can adopt babies

Yes, you can adopt babies.

You don't have to create sims to be adopted; the game will do it for you. That being said, if you don't have default replacement face templates and want to avoid ugly kids, you can make your own. Don't age the toddlers down to babies--that creates problems. Instead, create an adult of the opposite sex in CAS--make them look like you want the child to look. Then move them out into a lot, and either use the Tombstone of Life and Death or a mod like the SimBlender to make them pregnant with themselves. Speed up the pregnancy, and once they give birth, either kill the adult or age them down to toddler or child. The Social Worker will come for the baby--and they won't have any relationships to their siblings. I believe their memory will be wiped as well, but I've never adopted a baby taken by the Social Worker, so I can't say for sure.

I made a bunch of toddlers who were all siblings to seed the adoption pool; and the siblings all appear in the relationship bar for the first one who got adopted - until the second one got adopted, when the family tree was severed. Now she has relationships to all the seeded toddlers except the first one adopted.

So if you follow Lady L's advice, you might want to change the relationship of the parent aged down to toddler with the baby, with SimPE or whatever, just to be safe, so there isn't a toddler parent out there just waiting to glitch up.