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I take it your definition of "grace" is not unmerited favor but favor granted because of obediance to His covenant? How is the merit associated with the administration of baptism (e.g., sprinkling, etc.) transferred to the person being baptized? Does an infant also perform a meritorious work by submitting to baptism?
Speratus, grace is “unmerited favor” (an adequate definition for our use here). However, Scripture teaches that God commonly works through the means He has appointed in Scripture (i.e. baptism, the Lord’s Supper, prayer, faith, the preaching of the Word, etc.). Baptism, is a means of grace, but it does not convey the grace by its outward application. However, God uses the sacrament, when rightly applied and received, as a means by which He dispenses His grace to the recipient.

There is a sacramental union between the sign and the thing signified. It is a covenantal relationship. The words describing the thing signified may be applied to the sign and that which the words represent is certified by the seal. This means there is real promise (covenantal) attached to the right administration and reception of the sacraments, but the effect is from God. It is not inherent in the actions or elements of the sacraments. Baptism as an act does not remove sin or convey salvation. (paraphrased from Burridge).

Your view of baptism is most closely akin to Sacerdotalism. This is the view of the RCC. They expand the capacity of the sacraments to include the actual conveying of the blessing signified. The seal develops into not only a certification, but an actual imparting of the things being sealed. In his systematic, C. Hodge explains, According to the Romanists, therefore, a sacrament is a divine ordinance which has the inherent or intrinsic power of conferring the grace which it signifies. For a more lengthy discussion of the error of Sacerdotalism, see B. B. Warfield's The Plan of Salvation.

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Does man sin in all his works? If so, does not man's work of baptism increase his condemnation under the law? And, if baptism only increases man's condemnation, how can baptism be saving under any definition?
Man’s condemnation is increased if he receives baptism “improperly.” As Calvin states, “What is a sacrament received apart from faith but the most certain ruin of the church? For nothing ought to be expected from it apart from the promise, but the promise no less threatens wrath to unbelievers than offers grace to believers” (Inst. 4.14.14). However, baptism is NOT saving! As Calvin again states, “We must utterly reject the fiction of those who consign all the unbaptized to eternal death… Baptism is not so necessary that one from whom the capacity to obtain it has been taken away should straightway be counted as lost” (Inst. 4.16.26).

Reformed and Always Reforming,