"And he commandeth all men that they must repent, and be baptized in his name, having perfect faith in the Holy One of Israel, or they cannot be saved in the kingdom of God.
And if they will not repent and believe in his name, and be baptized in his name, and endure to the end, they must be damned; for the Lord God, the Holy One of Israel, has spoken it.
Wherefore, he has given a law; and where there is no law given there is no punishment; and where there is no punishment there is no condemnation; and where there is no condemnation the mercies of the Holy One of Israel have claim upon them, because of the atonement; for they are delivered by the power of him.
For the atonement satisfieth the demands of his justice upon all those who have not the law given to them, that they are delivered from that awful monster, death and hell, and the devil, and the lake of fire and brimstone, which is endless torment; and they are restored to that God who gave them breath, which is the Holy One of Israel.
But wo unto him that has the law given, yea, that has all the commandments of God, like unto us, and that transgresseth them, and that wasteth the days of his probation, for awful is his state! (2 Nephi 9: 24-27)

The way I read it, if your ancestors that you are baptizing thru proxy at your temples have not heard the words of God, than there is NO reason they would need to be baptized. All of gasoline you use, and the electricity you use, and the water you use early in the morning when you are dragging your children to be dunked repeatedly into a pool of over-chlorinated water is one gigantic waste of time and natural resources. Thanks for the conservation efforts Joel. Much appreciated.

JOEL - These scriptures do not say they don't need baptism. These scriptures mean that anyone who was ignorant of the law, or in other words did not get the chance to hear the gospel and repent and be baptized while on earth, will not be punished and sent to hell, because of their ignorance. They can't be punished for sins if they didn't know they were sins.
However, according to the scriptures everyone must be baptized(Mark 16:16, John 3:3,5) to fulfill all righteousness, as the sinless Jesus did while on earth (Matt. 3:15). Baptism is not only needed for washing away sins and to make the atonement work, it is also required for entrance into the Kingdom of God.
"Jesus answered, Verily, verily, I say unto thee, Except a man be born of water and of the Spirit, he cannot enter into the kingdom of God."(John 3:5)
Baptism also symbolizes a covenant people make where they promise to come into the fold of God and to take upon themselves the name of Christ.
For these reasons the ordinance must be performed on the earth for anyone who has lived or died(1 Cor. 15:29).
Because of the "mercies of the Holy One of Israel"(verse 25), we believe all those who did not get the chance to hear the gospel while on earth will receive that oportunity in the spirit world. (1 Pet. 4: 6, John 5:25, 28)
If they accept the gospel, the baptism that was performed for them in our temples will satisfy the requirement of being "born of water", and they will be eligible for enterance into the kingdom of heaven. We still do conserve energy by carpooling the kids to the temple :-)