Had we seen the two actual kiss then it might've been something romantic, but as it was they were hugging. If I hadn't seen my brother in months/years I'd hug him hello.
As for the child it can't be Demora as she wouldn't even be born in the 2260s, so I assume it Sulu's niece--or are we meant to overlook her age as they say we should do with "Pavel" Chekov?
It's another reality! In Parallels worf sometimes had children, sometimes he didn't. Sometimes he had one boy with Key'ler , sometimes he had two kids with Deanna. We must assume that it's similar here.