Now everything makes sense with the photos! So it is a Phal. Congrats on the baby plant!
Usually the rule of thumb is to wait until there is a total of 3-4 inches of roots (can be 1 4 inch roots, or 2 inch roots...) When it's ready, you can remove it by cutting the spike just above and under where the keiki is connected, or twist it off. I personally find it easier to cut, since I then remove the spike anyway.
Then pot it up in the smallest pot it will comfortably fit in, you may have to improvise something. For instance, in the past I've used a small plastic water bottle, cut it down to the right height, and then used small sharp scissors to cut drainage holes.
This reminds me that I have some keikis of my own to remove and pot up, I keep forgetting about them!