Note - I'm not gonna use spoiler tags since this thread is marked spoilers.

Anyway, yeah, I think Laguna definately knows Squall is his son - on the Ragnoroak he says something along the lines of, "When this is over, we have to talk," to Squall. This occurs around the same time Kiros pipes up with the "Good thing you look like your mother," comment, so it infers that "the talk" is going to be Laguna revealing to Squall that he is his father.

As for Squall, I think he's pretty obilvious to it, although he does arguably have more important things on his mind. It makes many things in the game quite humorous, however, like Squall's comment about Laguna, "I dreamt I was a moron," etc. One has to wonder how Squall would react finding out that Laguna is his dad.

As to why Laguna didn't do anything about it sooner, well, I think that's just Laguna. He's not exactly the most socially adjusted person on the planet - I don't think he knew what to do - he probably decided Squall was better off in the hands of Cid and Edea then with a self-proclaimed idiot such as himself. Plus, he was busy running Esthar, and he didn't come to get Ellone until late in the game as well.