I think that the Reformation initially retained a Sacramental Piety, however I've come to realize once more how important the Sacraments are in the discussion of theology. If the sacraments are means of communicating grace (Catholicism) or if they are superstitious and empty rituals.
This is also not so much a Catholic - Protestant issue, as it is a more specific Calvinist & Zwinglian versus Catholic and to a lesser extent Lutheran and Anglican.
The question is not simply one of whether there are 7 Sacraments: Baptism, Communion, Confirmation, Penance, Marriage, Extreme Unction, and Holy Orders, or just the first 2. It is also a question of what do the sacraments do? what is their purpose. The question after that though is one of the very character of God. Does God care about the outward and physical or is he only concerned with the inner and spiritual.
The problem is that our Christian Ethics are Ontological rather than Teleological - they are based on the motive of the doer, rather than just the outcome. Was it T.S. Eliot who said the greatest sin was doing the right thing for the wrong reason? (if not it was some other British poet). SO one has to question why God would imbue special powers to actions.
The Calvinist position as I understand it is that God works effectually outside the sacraments in that the baptism which forgives you is the baptism of the Holy Spirit which occurs at the moment of saving faith. The infant baptism is just a covenantal sign, but ultimately it has no purpose other than marking the visible from the invisible church, but since in Calvinistic Ecclesiology (doctrine of the Church) the 'true' church is always the invisible church anyway, so there really isn't any point in being in the 'visible' church.
The Catholic position as I've argued before is that the sacraments have power. They actually are objective means of receiving grace. Every time you receive the Eucharist you are recieving the physical body, blood, soul, and divinity of Christ (I don't know how one receives his soul if it's his body, but there is probably something about it in Aquinas or a Scholastic, so I won't argue it...maybe I got it wrong by including his soul, nevermind). Likewise when you are absolved and forgiven of your sins by a priest you are forgiven by God Himself.
There are many biblical and historical arguments I've already listed in favour of a literal interpretation of Christ's words about the Holy Communion, and the Sacrament of Confession/Penance, and an argument for regenerative baptism (it forgives your sins). If you wish to see more just check out one of these sites: http://socrates58.blogspot.com/2007/10/topical-index-pages.html, or http://www.phatmass.com/directory/
The basic question though is why God would promise such Power to the Church? Why would he give frail men the ability to bind and loose, why would he give the keys of the Kingdom to St. Peter and allow men to determine who enters the Kingdom of Heaven. In all honesty, it gives me two thoughts:
1) God has stupidly given too much power to the Church
2) The Bible must be written by the Church as a means to claim supernatural power
The third option of course is that the Sacraments actually do have power and are efficatious, that God does care about physical actions. As C.S. Lewis put it in his defense of grace through the sacraments in Mere Christianity, God has no problem with matter, he created it, and it's no use trying to be more spiritual than God.
I was thinking the other day about Rob Bell's "The gods aren't angry" and how he proposes that none of the Israelite offerings in the Old Covenent satisfied God as he didn't 'need' blood. He also asked the question "Does your God need to hurt someone so that he can love?" it sounds like a great atheistic question and I've finally come to believe (as all Christians holding to either Calvin's Substitution or St. Anselm's Satisfaction theology of Atonement should) that yes God does have to hurt so that he can Love. But in essence he hurts himself, in Christ, he provides the sacrifice, which becomes an eternal part of his nature (Christ's eternal sacrifice).
I also remembered the 2 stories of God's anger towards violations of his covenants. The Second is of course 1 Corinthians 11 where St. Paul writes that those who partook of the Eucharist in an unworthy manner 'drank God's wrath against themselves' and 'were guilty of the body and blood of our Lord' and that this misuse resulted in illness and death. The first however is more obscure, I read about it in Exodus 4 at Capernwray Bible School and it was a blessing to be 'forced' to read the whole bible so that now I am more aware of all these extra stories.
The story is about Moses going into Egypt after receiving his mission from God in the Burning Bush, Zipporah and Moses are travelling with their son when we hear this:
"On the way, at a place where they spent the night, the Lord met him and tried to kill him. But Zipporah took a flint and cut off her son’s foreskin, and touched Moses’ feet with it, and said, ‘Truly you are a bridegroom of blood to me!’ So he let him alone. It was then she said, ‘A bridegroom of blood by circumcision.’ "" - Exodus 4:24-26
It seems odd to us that God would plan on killing Moses for not performing this outward circumcision rite. We are constantly taught in the New Testament that "circumcision nor uncircumcision availeth anything" (Gal 5) and likewise by St. Stephen the Martyr that we are to have 'circumcised hearts' not dead rituals. However it seems that in this story God disagrees, not in a way contradictory to the New Testament but in a way contradictory to my former interpretation. What if God really does care about the Sacraments about his Covenantal signs and realities. It isn't all bad though, it's also a huge gift, for maybe God really does work through the sacraments. Maybe that is why the Eucharist means 'the Good Gift' (or at least that's what someone told me).
The real question then is why no angel killed Zwingli? but I guess 'where sin abounded grace abounded all the more' (Rm 5.20)
An interesting book on this topic which I hope to buy soon is Dr. Scott Hahn's "Swear to God: God's Promise and Power of the Sacraments" http://www.amazon.com/Swear-God-Promise-Power-Sacraments/dp/0385509316/ref=sr_1_11?ie=UTF8&s=books&qid=1221099823&sr=1-11.