This page has a large amount of information that is easy to understand and I recommend reading it if you have any questions
The rough summary though is that vehicle pollution is known to be associated with asthma, general respiratory illness, leukemia, heart disease, and dementia. With diseases like asthma, it is most strongly associated when children are very young (under 2). The state of California at least does not even allow schools to be built within 500 feet of a freeway.
There are always trade-offs to be made when picking a daycare, school, house, etc., but this one is often the easiest to avoid. Try to find a daycare away from major roads.
One other note...long commutes are similarly bad, and non-electric school buses in particular are awful. The bus stops often. The pollution is worst when accelerating/starting, the pollution is quite toxic, and kids at the stop and in the bus while at the stop are exposed to high levels of it. This is not talked about often for whatever reason, but please research this and try to avoid using a school bus with your children and/or petition your city for electric school buses.