Ok, so I noticed this when I first installed my game onto Windows 8: but every time I open my Babyz game it's reset it's playscenes to the default - so I can't decorate or anything, which is sad but I lived with it.
However, I've noticed another "side effect" - babyz don't age.
Which is ok with most babyz (like the little fairy I hexed way back, still sitting at 0 on the sliders and still a belly crawler lol), but it's kinda spoiling the fun of a grower!
that is your issue this is two issues in one: registry and saving! the saving is why the kids don't grow/learn/remember/change moods. Registry is what lets you have your house all set. Two different issues but compatibility is the likely fix for both!
I would also recommend setting your game to 'run as administrator' because a common problem in Windows 7/8 is that the game goes between running as admin and not which is what resets the game. I just set all of my games (Petz, Babyz, etc) to run as admin to avoid it resetting due to it automatically switching permission settings