I'm from Alabama, and I've never heard an adult address a child with "Hey baby" or "Hi sexy." As far as I know that'd be frowned upon here as well. Now, calling someone "honey," "darlin'," "sweetheart," "sweetie," or occasionally "beautiful" as you've already mentioned is pretty common, but usually among women (and gay men). Straight men, unless they're an older grandfather-father figure type, don't say things like that.
To the OP, I think you should speak up. Or just try to stay out of their company.