You CAN file dual-status if you wish.
However, You can and probably should file jointly with your wife and you both CHOOSE to be treated as resident aliens. This will allow you to claim the $11,400 joint standard deduction plus THREE $3,650 personal exemptions (for yourself and your wife and your child) plus the $1,000 Child Tax Credit.
To apply for an ITIN, you need to complete Form W-7 for your wife and child. You need to make a photocopy of her passport, then get the photocopy notarized. This can be done at your local bank in most states in the U.S.
The downside is that you must declare ALL 2010 world-wide income (your and your wife's home country income, if applicable). There is an offset available by either claiming the Foreign Tax Credit (Form 1116).
Even with the downside, this is probably the best way for you to file.
If you need professional help filing your return, email me at
[email protected].