Let's be clear on what the Bible says first about all people....all have sinned and fall short of the glory of God. We are all born as sinners based on the Word.
Let's go from there to your question.
We do have the example of David's son who died just after birth. David expressed confidence that he would see the boy again. This can only mean Heaven.
This has been called the age of accountability by many....though it is not explicit in the Bible. It is the belief that you have to be of age to know the difference between right and wrong. A number of people say this age of accountability begins somewhere around 10, maybe 12.
As babies and the severely retarded would fall into that category of not being able to discern right and wrong the belief is they would go to Heaven.
The one passage that seems to identify with this topic more than any other is 2 Samuel 12:21–23. The context of these verses is that King David committed adultery with Bathsheba, with a resulting pregnancy. The prophet Nathan was sent by the Lord to inform David that, because of his sin, the Lord would take the child in death. David responded to this by grieving and praying for the child. But once the child was taken, David’s mourning ended. David’s servants were surprised to hear this. They said to King David, “What is this thing that you have done? While the child was alive, you fasted and wept; but when the child died, you arose and ate food.” David’s response was, “While the child was still alive, I fasted and wept; for I said, ‘Who knows, the LORD may be gracious to me, that the child may live.’ But now he has died; why should I fast? Can I bring him back again? I shall go to him, but he will not return to me.” David’s response indicates that those who cannot believe are safe in the Lord. David said that he could go to the child but could not bring the child back to him. Also, and just as important, David seemed to be comforted by this knowledge. In other words, David seemed to be saying that he would see his baby son (in heaven), though he could not bring him back.
Although it is possible that God applies Christ’s payment for sin to those who cannot believe, the Bible does not specifically say that He does this. Therefore, this is a subject about which we should not be adamant or dogmatic. God’s applying Christ’s death to those who cannot believe would seem consistent with His love and mercy. It is our position that God applies Christ’s payment for sin to babies and those who are mentally handicapped, since they are not mentally capable of understanding their sinful state and their need for the Savior, but again we cannot be dogmatic. Of this we are certain: God is loving, holy, merciful, just, and gracious. Whatever God does is always right and good, and He loves children even more than we do. Read more: http://www.gotquestions.org/age-of-accountability.html#ixzz3T3VA7YR6
The example of David is a good one. The consequences of his sin reverberated way beyond his own family. Having said that, I think you also must consider the nature of God who IS LOVE. (1 John 4) Who gave himself for all mankind, and wishes that all men be saved. (1 Timothy 2:1-6)
Age of accountability is a good way to consider things, although I believe the range to be a bit wider. I have known some young children who KNEW Jesus, and exhibited more faith and spiritual fruit than some adults. I also know that this age is different for every child. That is why its critical for parents to get their child in the Word early. I am so thankful for my parents who were sharing the Gospel, praying for and with me, taking me to Church and Sunday School, and had me reading the Bible long before I started school. That foundation proved most helpful while attending secular schools and living with the many temptations of youth.
Those who have NO choice, aborted babies for instance, or who are incapable of hearing the Word and believing, will be judged accordingly. Sometimes we must have faith in the Wisdom and Mercy of our Creator. I think we will be pleasantly surprised by how many will be with us in Eternity. Although we should not let that fact cause us to stop sharing the Gospel, preaching God’s Word, or continue in whatever activity God has given us in the Body of Christ.
Satan is a created being. It is his rebellion and temptation of Eve that led to the fall of man. It is he who comes to destroy babies in the womb. He is the one who kills children who have not heard or understood the Gospel. He is the thief behind mental illness and disabilities that might prevent knowledge of the Truth. He is the one that steals the Word from those who do not understand. God has judged the enemy, and will apply perfect justice in the end.
Isaiah 30:18 (AMP)
18 And therefore the Lord [earnestly] waits [expecting, looking, and longing] to be gracious to you; and therefore He lifts Himself up, that He may have mercy on you and show loving-kindness to you. For the Lord is a God of justice. Blessed (happy, fortunate, to be envied) are all those who [earnestly] wait for Him, who expect and look and long for Him [for His victory, His favor, His love, His peace, His joy, and His matchless, unbroken companionship]!
The consensus of Catholic theologians is that unbaptized persons who have committed no personal sin go to Heaven. The Catechism teaches that we are to commend such person to the mercy of God.
I.e., the Catholic consensus today is the same as the position you have taken.
The position of a number of Fathers (e.g., Augustine) was the people were damned because of Original Sin.
I think the concept of what Original Sin IS has evolved.
Original Sin is called “sin” by analogy. It is the absence of grace and a deformation of human nature, which, with sufficient maturity, leads to personal sin.