Yes she is. Sakura has always been painted as his love interest. It was only recently that she accepted that in the games and decided that she wanted Ryu to know how she felt after she gets acknowledged by him Sakura even keeps a picture of Ryu from before as her motivation to go further beyond her limits.
Capcom had them follow the canon set, they couldn't do as they will. Same as the movies. Capcom wouldn't have let them do that if the didn't agree with the story direction.
Yes the child does look like Ryu. He has his face and the hair is similar. Furthermore, Ryu hasn't had messed up hair for a long time.
http://vignette3.wikia.nocookie.net/...20111018171641
Looks just like Ryu of the sprite era. All the kid needs is slightly longer hair to fill him out, instead of a bit much on the top, and a bandana. Regardless, the child clearly was intentionally made to look like Ryu.
Furthermore, the child looks like no other character but Ryu in the series and Sakura is only shown to be romantically interested in Ryu. Her SF4 endings reinforce that even when she got a bit older.