inderp,
For your child apply for a PIO then convert it to an OCI after a couple of years.That is the way to go for all children below 18, unless you are flush with funds and $100 doesnt mean anything 
genesis1,
They recently updated the MHA website hence the change in language
spprash,
Before you go to the consulate get a proof of mailing and delivery from the authority you mailed it through.
Everybody,
From personal experience I can tell you that irrespective of the mode of delivery,it takes 7 days for an envelope to go from the mail room to the concerned dept (Passport containing envelopes are an exception).So please factor this into your calculations.This may or may not be a NY specific phenomenon.
New OCI applicants please go to the thread before posting questions:
http://www.immigrationportal.com/showthread.php?t=209468