Someone decided to point out this thread to his brother, and suggest he post something. So here goes. 
(Sorry it’s rather long, but I find this topic fascinating!) I don’t mean to cut of the existing conversations, but I do want to give my take on the original poster’s questions.
I think that important aspects of the theological meaning of Jesus’ baptism come to light through some historical context. In this we find that John’s baptism was not only religious but inseparably political as well, and that in the political meaning we find something of the religious and theological meaning as well. Much of what follow is based on the writings of leading New Testament scholar N. T. Wright.
Jesus has no intention of starting a new religion. But, like John the Baptist, Jesus led a renewal movement within Judaism, and his acceptance of baptism by John shows that he had agreed with John’s message and program. So then what was John up to?
John the Baptist’s decision to conduct baptisms at the Jordan River, first of all, evoked the Old Testament story of Joshua’s crossing of the Jordan, as he had led the Hebrews into Palestine, the “Promised Land”, bringing to completion the journey that had begun in the Exodus (Joshua 3–4). As the story goes, the Jordan was kept from flowing so that the people could cross the Jordan on dry ground. This in turn echoed the dramatic parting of the Red Sea (or Sea of Reeds) in the Exodus story, when the Israelites crossed through the sea on dry ground to escape Pharaoh’s army (Exodus 14). John’s baptism — going down into the Jordan back up again — was almost certainly meant to be symbolic of a New Exodus.
This bring us to Isaiah 40:3, “In the wilderness prepare the way of the LORD, make straight in the desert a highway for our God.” This verse is closely connected by the Gospels with John’s ministry (Matthew 3:3; Mark 1:3; Luke 3:4–6; John 1:23). It comes at the beginning of a key section in the book of Isaiah, chapters 40–55, where the return Exile is announced in terms of a New Exodus. Notice, for example, how the way in the wilderness evokes the Israelites’ journey through the wilderness during the Exodus, or how new promises that water will be provided in the desert (Isaiah 41:17–18) echo the same in the Exodus story (e.g. Exodus 17:1–7). The way made through the sea in the Exodus is compared to the new way of return from Exile in the wilderness (Isaiah 43:16–21).
Now, ancient Jews believed that the Babylonian Exile had come about because Israel had sinned and breached its covenant with their God. This had resulted in the enactment of the curses of the covenant (akin to punitive stipulations in a contract) — see especially in Deuteronomy 28–30 — including famine, pestilence, other disasters, the destruction of Jerusalem and its Temple, and the Exile. And as several scholars of ancient Judaism have argued, many Jews in Jesus’ day believed that their nation was still suffering under the curses of the Exile, and so they were awaiting a liberation from this condition along the lines of the New Exodus found in the book of Isaiah. (Daniel 9:24–27 extends Israel’s “exilic status” from 70 to 7 x 70 years!) While many Jews were living again in their homeland and no longer in physical exile, they were still under foreign domination and had not returned to being the righteous and prosperous nation that they expected they would become after the exilic curses were lifted.
If John was proclaiming the long-awaited New Exodus connected with Isaiah 40:3, what then do we find in the preceding verse, Isaiah 40:2? It speaks of God’s forgiveness of Israel’s sins, that is, that nation’s sins that had led to the Exile and the covenant curses. So here we discover another dimension to the “forgiveness of sins” connected with John’s baptism. Wright emphasizes that in first-century Judaism, the phrase “forgiveness of sins” would was not simply about an individual’s sins, but would have been heard primarily in reference to Israel’s sins as a nation. John was effectively proclaiming that those Jews who repented and underwent his baptism were forming the renewed people of Israel, free from the exilic curses at last. In John’s view, Jews could not depend on their ancestry alone to be included in the true Israel, but needed to “bear fruit worthy of repentance” (Matthew 3:7–10 = Luke 3:7–9). Through John’s baptism, the true Israel was being formed that would escape the coming divine judgement.
John’s “forgiveness of sins” has another angle. In Jesus’ day, if Jews wanted their sins forgiven, the official and established way was to bring a sacrifice or offering to the Temple in Jerusalem. By offering a means of receiving forgiveness of sins freely through baptism, John was implicitly criticizing the official Temple system in some way. This need not have been based on a criticism of the idea of animal sacrifice per se, but was more likely a criticism of the corruption of those who were running the Temple system. These were predominantly the Sadducees, who supported Roman rule and were in turn kept in power by the Romans. Roman rule was not only oppressive in itself, but the ruling elites among the Sadducees benefited from economic exploitation of the poor through debt enslavement and other means. John apparently had been critical of the Romans’ appointed ruler in Galilee and Perea, Herod Antipas (Mark 6:18). And any prophet gathering a group of followers in the wilderness would have been seen as a potential threat to those in power. And so, just as the Exodus had involved liberation from the oppressive slavery of the ancient Egyptian state, it seems that the New Exodus would involve God’s judgment of and faithful Israel’s liberation from the oppression of the Romans and their collaborators.
One thing that Jesus’ baptism by John “did”, then, is formally show that Jesus was including himself in the renewed Israel based around John’s movement. And it shows that Jesus had aligned himself with John’s message. The extent to which Jesus might then have come to adopt views that differed from John’s is a matter of great debate among Jesus scholars. But many have held that Jesus, too, led a similar renewal movement within Judaism. But whereas John’s disciples fasted, Jesus and his followers did not (or at least not as often) — Mark 2:18–22. Jesus, rather, ate and drank with “sinners” and “outcasts”, not simply preaching the need for repentance to them but meeting them where they were at and inviting them into God’s kingdom. And if Matthew 5:13–16 and parallel passages are any guide, Jesus was preaching not simply the need to repent in the face of the coming judgment, but was drawing on that strand of the Old Testament hope in which Israel was to be a holy people, set apart to be an example of a people living in faithfulness to God, the salt and light of the world, and thereby be a blessing to all nations (cf. Genesis 12:3).
One of the theological implications of all this, I think, is that it reminds us of the importance for Christianity of our lived reality in this world. This is why the role of Israel, a concrete people, is important in the theology of the New Testament. Jesus’ mission was not simply spiritual, but had what we would call political and economic dimensions as part of its theological significance.