If the cloud itself is going to be smash cake, I agree with GI, it should be made of carved cake and buttercream. You could also make the cloud from Rice Krispy Treats covered with fondant. When it comes time for the smash, you could just lift off the cloud and figurine and let the baby smash the cake. It would make a cute keepsake.
I don't have any suggestions that differ from above but I just wanted to add, do not use marshmallows, they are a huge choking hazard as they mold to the windwipe if they 'go the wrong way'.
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