As weird as it sounds, I believe
@Seym has this exactly right - and what I had wrong is that I forgot that automatically becoming a citizen invalidated the PR status.
Just putting a sort-of marker down for this for others to note - that although it's easy to say that on paper 'the child IS a citizen', it's not exactly correct, and that extends to the PR status being invalidated. Neither happen 'automatically.'
I'm not a lawyer so I'm going to put it this way: the child / anyone in a situation where they should be a citizen under the law is not
recognized as a citizen until the process is complete (and eg a citizenship certificate issued). With the documentation in hand and presented to IRCC (or an embassy or whatever), but prior to complete evaluation*, I think we can say that the individual is a
presumed citizen, and the government would - in most respects - be expected to provide essential - necessary - services. (But subject to serious limits, like some limitation on costs, since not yet in any system to bear those costs). Need to travel to Canada and all seems in order? They should (and I believe will) issue a passport - at least if all bonafides etc.
The PR status, in the unusual situation like this? Well, presumed citizen means ... presumed invalidity of PR status. But in practical terms, I think they would not actually do so (retroactively or otherwise) until late in the process of approving/issuing the citizenship certificate. Because cancelling it too early would potentially harm the PR-presumed citizen, and if citizenship couldn't be recognized for some reason, the invalidation of the PR status would be invalid, too.
So keep the PR card for now.
Eventually they'll figure this stuff out, after some lawyers and administrators have had to deal with it. They might even come up with policies like "for those who are already PRs with valid PR cards, we won't issue a passport until citizenship confirmed, because that individual can travel to Canada using the PR card." (Or they might decide something else instead, or if there aren't many cases, maybe it'll just be footnotes here and there in some admin manual or email chain internal to IRCC and lost to history, unless it gets to the courts)
* We say evaluation but it's mostly checking docs and the like - it's not some subjective evaluation of 'worthiness.' Which might be tediously long, checking documents and validity. But for those for whom the right goes back to birth in Canada (via parents and further back), the only exceptions (I think) at present are those who were eg born of foreign diplomats and the like. (And they have mistakenly granted citizenship in a few cases like this and it got messy and legal years after the fact - if it's mistaken, they can strip the citizenship).