I agree, Miss Taken. And the scriptures support your concept. Despite the erronouse total rejection of the validity of other people who claim God as their own, the Jews knew at least one important concept: God is no respector of persons. There never was a covenant people; it's impossible to align a "covenant people" with the concept of "no respector of persons," so for Joseph to "restore" the concept only shows his ignorance of how God really works. (Joseph's gift was the Book of Mormon, nothing more. Everything else is the teachings of men mingling freely with God's own teachings.) The ancients had no clearer concept of God than the men today. They guessed, they wished, they hoped they got it right, but because they had no clearer a conduit than we do, they missed the mark, sometimes by a little, sometimes by a lot.
There certainly is a concept of a covenant and chosen people. The Whole Old Testament is about that. In fact, the New Testament is too, when one studies its teachings that the gentiles are adopted in and covered by the Abrahamic covenant when they are saved by Jesus Christ. So Joseph Smith was not in error in at least thinking that God works through a covenant people.
As for the quote by Whitney it is based on the belief that the temple covenants and sealing power mean something. It does not give sinful children a free ride but notes that they will pay the utter most farthing themselves, being turned over to the buffeting of Satan. In other words, they pay for their own sin if they do not repent, which is true of anyone, then the sealing power will still bind them to their righteous parents.
I am curious. I have seen this quote from Elder Whitney many times. He attributes this to Joseph Smith but I have not found on the point remarks by Joseph Smith himself. Anyone know where it might be found?