I'll check in with a pro-529 opinion. It's great that you are thinking of this so young. At 2, you have 16 years before you need to use this money: plenty of time for the investment to compound. This is where the tax treatment really comes in handy vs. a taxable account.
As for retirement accounts, it is true that you should take care of yourself first, because nobody will give you a retirement loan. But, if you are looking to use your retirement funds to fund a child's college, then I would ask where will your retirement be? Most people aren't saving enough in retirement for both: even Mustachians face contribution limits.
As for other accounts, custodial accounts can have lower tax rates, but can severely limit the possibility of (need-based) scholarships. Regular taxable accounts are, of coursed, taxed at the parents' higher tax rate. Even if your investment strategy means this is all at the capital gains rate, you need to adjust your savings target up to compensate.
One point of caution in your story: you mention tax deductible. 529 contributions are *not* deductible at the Federal level. Many are deductible at the State level, but some are not, and the level varies. (and most often, limits you to your State's plan) Research this carefully before depending on the information.
One positive: 529's are applicable to many types of education, not just for 4-year colleges. Your child probably needs some skills beyond high school to have a good career. With the new tax laws in place, that can include K-12 education, too. (thought that blunts the benefit of compounding)
Regarding having too much, either through choice or scholarships: You can withdraw funds from your 529 in the amount of your child's scholarship without the 10% penalty. (although not tax free) So if they achieve, no harm no foul. If they find a life path that does not require formal schooling, you can also name a different, related beneficiary: a sibling, a niece / nephew, or even yourself!
I started my 529 when my son was 0. (the year before he was born) Living in Michigan, we have a $10,000 tax deduction in a State that is stingy with them. (at 4.25% tax rate) I am contributing that limit until he turns 5. By the time he is ready to go to college, we should be well within reach of paying for it--I expect $100k-150k. I call it The Price Is Right Strategy--trying to come close, without going over. If my son chooses something other than college, and I have no other uses for the money, I will gladly withdraw it, even with penalty, seeing it as a bonus for having achieved the growth of a child with less resources than planned.