This blog: http://www.kalzumeus.com/2010/03/20/running-a-software-business-on-5-hours-a-week/ is a great source of info an inspiration. If hw can do it in the hours he had spare then itis indeed possible.
Have a look around his blog, there are a lot of great posts and tips for fledgeling startups.
My 1st child is now 8 months old. I am getting a little more "free" time than I did in the first ... um, 8 months so rest assured it gets a little easier. A little,. As others have said or hinted at here, explicitly manage your time but do it intelligently.
Friday is my main code-at-home day. I take my daughter to daycare at 9am and pick her up at about 3:30-4pm. I actively structure my day around that. There's a dreamfeed at about 5am. If I'm not too tired I stay up and get some work done. I make sure that I have some quiet time to contemplate what I am doing today. Enforce this. Last week I spent a few hours coding a feature. I got it 90% finished when I asked myself WTF? Will anyone want to use this? DELETE. It's in source control if I ever need it but my point is - think about what you're doing. Does it have a use-case?
oh, and DO IT! I have been working on my "startup" for years now (YEARS), in the "planning stage" and I haven't shipped a damn thing yet. I look back on the time I wasted (not all of it but about 1/3 of it) and kick myself. Every day counts. Every hour counts. Manage yourself. Try Pomodoro or things like that.
Having said that, a lot of my original ideas now seem too far-fetched to the clients I am aiming at so not all planning and contemplating is wasted.
Spend your time working rather than meta-working. Blogs and the like are nice but you're never going to know everything you need to know, at least until you realise you need to know it. JIT - Just In Time is not just for compilers.
A little disjointed but I hope you get something out of it.