In the aggregate you are absolutely correct. If a baby is going to cry and interupt passengers around them, F will have lower number of pax bothered, due to the lower seating density, so flying kids up front is the best way to minimize the number of people affected.
While my post was intended to be sort of semi-serious, semi-sarcastic, I actually think that the population density part of the argument is less important than the others - when I'm flying Business Class, I'm more capable of being the best parent I can be, making it more likely that the child will not be a nuisance to anybody - which, of course, is always the goal. In coach, not only does a nuisance child bother more people, the lack of space, service, IFE, etc. makes it that much more likely that said child will become a nuisance in the first place.
Of course, this assumes all people are equal and, and as you can tell from the many posts in this thread, high-status frequent flyers and those who can afford paid F/C tickets are much more important than the common folks. Just ask them.
Honestly, I think that it would make sense for airlines to do something about this. Even something as simple as saying that nobody under 5, 8, or some other arbitrary age can sit upstairs would create a small "kid-free" premium zone. My assumption, given the level of anger the issue creates, is that most airlines have gotten TONS of communication asking them to restrict C or F, and have made the decision (presumably for sound business reasons ... a rash assumption to make when we're talking about airlines, but even the "good" airlines in the international market like the holy SQ don't seem to keep kids away from the front as a matter of policy) that restricting kids from premium cabins isn't a good business decision.
It would be interesting to know if any airline has ever attempted this, or if perhaps one will sometime in the future.