If you want your logging filehandle to avoid buffering, you have to disable it explicitly for that handle, not STDOUT (as you're doing now). I prefer the IO::Handle approach and lexical filehandles to select/$| mangling:

use IO::Handle;

sub daemonize
{
    my $log = shift;
    $log->autoflush( 1 );

    # forking code goes here

    if ($pid > 0)
    {
        print {$log} "Forking Success. Child PID: $pid \n";
        exit();
    }

    print {$log} "Child Process Executing... \n";
    setsid();

    # ...
}
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Of course, if you've gone that far, it's not too far to use some sort of logging object that takes care of buffering/unbuffering and newlines for you, but that's more work than you suggested you need right now.