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See if it moves away with the T-pose (F6) in Bodyshop. That's the same pose as in Milkshape, but with the bone assignments showing properly on a sim instead of on a non-animated body.
The toddler in a regular pose in Bodyshop is ever so slightly hunched over, and that line is quite common.
Could be you have to do some fixing on the bone assignments in that area, but toddlers have a tendency to spend a lot of time sitting, so that bend will probably be hidden quite a lot of the time anyway, unless you move the UVmap and/or texture.