Ugh! I feel for you! My daughter sort of did the same thing, although her issue was with BM's. She would pee in the potty with no problem and was going #2 in the potty also, but then one day just decided not to anymore. She had been going on the potty and was out of diapers for several months and then one day, just didnt' want to stop playing to go. We tried the punishment, begging, pleading, crying, rewards, bribes, etc. and nothing worked. She eventually started going in the potty again, but it was really tough to know what to do until she decided to do it on her own.
I guess my advice would be to let your son go on the potty when he asks to, but don't make any big transitions out of diapers or pull ups yet if he's still in them. The reason I say this is because of the new baby. He is likely to regress (again) once the baby arrives and with a newborn in the house, that is a recipe for major stress for you! I would suggest encouraging him as much as you can and giving him lots of praise when he goes on his own, but wait at least 6 weeks or so to make any big moves to underwear or anything like that. Give your family time to adjust to the new baby before you make any big potty changes. I would not discourage him from wanting to use the potty (in other words, always take him if he asks), but as far as having to clean up his messes over the next couple of months, I would avoid that if you can for now.
I will say that at some point, you're just going to have to put him in underwear and not look back, but I don't think that timing is right now with baby's impending arrival. Give your family a little adjustment time and then let him have underwear if that's what he wants. At his age, if he has an accident, let him clean himself up and change his clothes. If he has to take care of his own accidents, he may stop because he won't want to give up playtime to clean himself up. Also, make him rinse his clothes out. Don't make it seem like punishment, just be very matter of fact. Tell him that if he chooses not to use the potty, then he will have to clean up the mess. That's it, no yelling, no getting upset, just let him do it. He will eventually get there and believe me when I say that I know how frustrating the stopping and starting is, but they do eventually get it! I'm so not looking forward to training #2 here pretty soon! Good luck to you.