From a biblical perspective, incest was only made immoral under the Mosaic covenant.

As for the biological situation, one possible explanation for why said babies weren't sickly is how the genes work. Now this is how I understand it and I could be wrong. But as it was explained to me, basically we all have flaws in our genetic code. And when a child is made our two genes come together and the hope is that our partner is flawed in areas our genes are not and vice versa, so the gaps are mostly covered in the joining. If you have closely related genes you have less genetic diversity and more likelihood of genetic flaws.

So, if hypothetically in the days of Adam and Eve, their genetics were pure, then incestuous relationships wouldn't produce the flawed abnormalities we see in products of incest today.

As for the bellybutton thing, well, I imagine much the same reason why biblical characters are depicted as white or close-to-white in western art. They look around at what they know of the human body, what they see around them and draw what they know. People have bellybuttons. In renaissance Italy there's not a great number of middle-eastern people so its olive and white skin mostly.