I think this is a killer idea. I have a 6-month old and the only picture we have of him on the fridge is an ultrasound picture.
I would recommend making this as easy to gift as possible. A subscription like this might be more popular as a shower gift than something new parents purchase themselves. (Citrus Lane does an excellent job at this.)
More market validation: I also have a 6-month old and am really tired of the crop, upload, select photos, select size, select paper, fill out shipping addresses, enter payment info process I have to do every few months to send photos to family. I will say most of my family wants digital copies and don't care as much about prints -- unless they are amazing photos.
But, I have several family members that don't have computers or are not savvy enough to save photos to their computer. And they love prints. I'm your target market and I have to say this sounds like the perfect service for me.
People want to give gifts, not gift cards. :) Make sure that it's a stand-alone product (eg. a 6-month subscription) that can then be extended or upgraded, not $50 towards a membership.
I would recommend making this as easy to gift as possible. A subscription like this might be more popular as a shower gift than something new parents purchase themselves. (Citrus Lane does an excellent job at this.)