Hello and welcome! This site is wonderful and the people and moderators here are so helpful. :D
Do you mean Lamb's Pride Worsted? If so, I'm doing a sweater right now and am substituting Encore worsted for that yarn and it's working nicely. For a baby hat, I think a good substitute would be Knit Picks Swish Superwash...100% Merino Wool, washable and sooo soft!
I'm not sure if your Merino is too thin or not, since I don't know what the details are for the specific yarn you're using. What does it say on the label as far as needle size and stitches per inch? I know that Lamb's Pride Worsted is recommended for US size 8 needles and the gauge is 18 stitches = 4", so you'll want your yarn to be close to that.
I hope that helps...I'm not a knitting pro or anything...those are just my two cents! :P