Is it a bad idea? On the face of it, I say no. I mean, I was THIS FAR from doing the same thing to make a reverse-cam on my van.
But, as I do around here, lets consider it from a different angle. As a technophile myself, let's think about it as if you were building a pc. I've done it I don't know how many times, so I can build a shopping list in my sleep.
There are likely plans somewhere on the interwebs about how to do it cheaply and just as good. So let's say that you get your shopping list. You build the thing, it works great, it was cheap, all that . . .
Then a part fails.
On a DIY PC (lets say it was the HD), you have to thoroughly troubleshoot the part and then play circus-freak doing all the calisthenics that the manufacturer requires before they give you an RMA#. Fastest I've managed to get a part between moment of failure and moment of reboot is probably 9-10 days. On a hand built baby monitor system, I can't imagine that it would be any different.
This example is meant to make a point that most people don't get: the price you pay for anything is for some kind of convenience.
For bread, you can buy the parts and make it yourself for way cheaper than $1.50/loaf. The convenience is time. For some kind of warranty, it's the convenience in the case of failure. For this item, you're paying for both conveniences. For a unit with screens, cams, low power modes, quiet alarms, etc etc, the $200 price tag is for the simplicity of operation AND for the 1 year (or however long) warranty. If something blows out, you'll have another one in your non-diaper holding hand probably as fast as UPS can get it there... 2-3 days. Complete unit, whole, working, in the plastic, pristene, all that. Imagine for a moment the rigamarole of what you'll have to deal with on a DYI setup.
On the other hand, from one technologist to another, here's a separate idea: Try local Salvation Armory or Goodwill. Our local places have, not just baby monitors, but 10 yr old laptops and cheap-ass net-books for what $30-50. It will have wifi and usb, and that's all you need. a $20 webcam and a low-resource configuration (ubuntu 11.04 anyone?) and you have not only a baby monitor, but something to play night-night music and do whatever else.
Bad idea? Abstractly, No. But it depends on how you do it as to whether or not it's a functionally bad idea.