Oh wow, a real get-stuck-in discussion! I managed to miss the early stages, but am going to add my 2p worth as a Catholic whose children go to a Catholic school.
In Catholic teaching, a sacrament like baptism is an outward sign of a spiritual grace. Following this reasoning, baptism is an inherently good thing and I would not in principle have a problem with someone who did not believe having their child baptised. Having said that, if their motive was a purely cynical one to obtain a particular secular advantage for their child, it would make me uncomfortable.
Most Catholic parishes take a similar view, and do require parents asking for baptism to explain their connection with the parish and to attend a preparation course.
In response to the comments about Catholics believing that unbaptised babies go to hell, I think you would nowadays have trouble finding a sane Catholic who would take that view. Having said that, since baptism is a source of grace for the baby and a way of welcoming it into the church, there's no reason not to do it.
I can see the reasoning of people who argue that baptism should be an adult choice for the individual one of dd2's godparents is an evangelical Christian who I'm sure takes that view but I think these differences stem from slightly different understandings of baptism. For Catholics that adult commitment is made at confirmation.