Personally, I have grown more convinced that this is the biblical understanding of baptism. It really clicked for me last spring as I was studying the theology of the church and the sacraments in my RTS class. Besides the normal arguments, the following idea did it for me. Circumcision for the Jews was a sign that they ought to be circumcised of the heart (Jer. 9:25-26). In the same way, baptism is now a sign that points the people of God towards His covenant love and reveals the need to receive a baptism of the heart (See Colossians 2:11-12). Baptism is a sign of entrance into the visible covenant community.
Jason took the following quote from Robert Booth's book, Children of the Promise. I think it wonderfully sums up the point of the sacrament of baptism:
“Baptism, as circumcision, is a gift of God to his people, not of his people to God. Abraham did not bring circumcision to God; he ‘received’ it from God. God gave it to him as a ‘sign’ and a ‘seal,’ not to others but to himself. It is inadequate, therefore, to speak of baptism as ‘the badge of a Christian man’s profession.'...The witness of baptism is not to others but to ourselves; and it is not by us but by God that the witness is borne.”