I am glad to see this small step to bring Catholicism into the modern period theologically, especially for all those parents who have lost children through miscarriage and still births. Maybe now their babies can be buried in consecrated ground? At least this will bring relief to some.
It doesn't surprise me however, that the reaction of Catholics to this is divided. The Houston Chronicle reported that a columnist named Kenneth Wolfe from the Remnant, a Catholic newspaper, said that the Vatican is suggesting that salvation is possible without baptism and that this is heresy. But what really seems to be at stake is the Church's position on abortion. There is the fear that this position will be weakened because it was always taught that the aborted child would go to limbo, not heaven.
So there we go. It is a modern heresy to say that an unbaptised child might go to live with God in heaven because God has compassion. Why? Not for any sins that s/he might have committed, but because of the stain of original sin. Thank you Augustine and all those men who have never born a child from their womb.
Update 5-7-07: Gdelassu provides this link to the official Catholic declaration.