Must be a Canadian colloquialism...
http://www.bartleby.com/59/3/dontthrowout.html
http://english1010.com/throw_the_baby_out_with_the_bathwater.htm
http://www.wordskit.com/language/legends/bathwater.shtml
Then again... maybe its just me... :-)
I've heard that before. It means don't get ahead of yourself; the bathwater is dirty, but don't throw the baby away with it, take your time.
I don't think it's Canadian. I've heard it many times before.