This is a highly complex issue. In fact, the FAA has no specific regulation regarding the restraint of infants, but specifically bans the use of the loop seat belt. The loop seat belt is also banned in Germany. In the rest of Europe the loop seat belt is permitted, but not recommended. The best advice is to purchase a seat for your infant and put them in a child car seat. This is the least worst option, given the complete lack of research into outcomes in the event of a crash. However, the likelihood of a crash is extremely remote. The advantage of a loop belt over simply holding the child is in the event of turbulance, which is significantly more likely.
I do not think the AA flight attendant was breaking any rules. However, this issue is discussed at length here:
http://www.aerospace-technology.com/.../feature48143/
When travelling from the UK to the US, it is best to fly Virgin Atlantic or BA even if this means a change in London. AA, Continental, US Airways and United are hopeless.