I too have found some aspects of Batchelor's works useful, even if I'm not quite sure what to make of the extent to which he characterises Buddhism as agnostic or atheistic. In any case, Batchelor's interpretation is not new. His interpretation of Buddhism as agnostic-atheistic can be located on genealogy of scholarship that traces back to T.W. Rhys-Davids. In Buddhism: A Sketch of the Life and Teachings of Gautama, the Buddha
, Rhys-Davids wrote, 'Agnostic atheism was the characteristic of the [Buddha’s] system of philosophy' (p. 207).
Rhys-Davids is of course a key figure in the study of early Buddhism. Given how Rhys-Davids founded the Pali Text Society, his influence on how we now interpret Theravada is not insignificant. Richard Gombrich has suggested that Rhys-Davids 'did more than anyone else to introduce [Buddhism] to the English-speaking public, influencing even English-speaking Sinhalese Buddhists', and thus 'serious students of Buddhism will never allow [his] name to die' (quoted in Charles Hallisey 'Roads Taken and Not Taken in the Study of Theravada Buddhism', in Donald Lopez (ed.) Curators of the Buddha: The Study of Buddhism Under Colonialism
I point this out not to suggest that Buddhism is indeed agnostic or atheistic, but to point out how Rhys-Davids' interpretation of Buddhism (like Batchelor's) was a decidedly modern one, a particular interpretation that was shaped by the conditions of his time. Rhys-David's interpretation of Buddhism must be viewed in the context of the late 19th century, where the tensions between western monotheism and the emergent scientific worldview framed his reading of Buddhism in humanist, non-religious terms. While I do not doubt his dedication to scholarship, it should nevertheless be noted that Rhys-Davids was selective in the materials he examined. Several studies (like Hallisey) have pointed how he ignored some texts (especially those that would associate Buddhism with ritual or religiosity) regarded by Asian Buddhists to be central for understanding Buddhism.
Rhys-Davids sought to uncover the biography of Gautama and portrayed the Buddha as a mere mortal, even though many accounts of the Buddha depicted him supernatural terms. Such a reading of the Buddhism effectively imbued the Buddha with Victorian values and portrayed him as the perfect Victorian gentleman. There was an ideological impetus behind this interpretation of the Buddhism. While this interpretation of Buddhism reflects Victorian values more than it does what Buddhism was 'originally', it allowed western interpretators to denigrate Asian Buddhism (with all its rituals and religiosity) as degenerate and adulterated. This disparaging attitude towards Asian Buddhism is tied with colonial politics: the claim that Asian Buddhism had forsaken the Buddha's 'original' agnostic-atheistic teachings served to justify the paternalism of colonial rule. It is worth recalling here that Rhys-Davids first encountered Buddhism while he was serving in the Ceylon Civil Service (1864-72).
What I am suggesting, then, is that there is no way to unambiguously position Buddhism as agnostic or atheistic. Any attempt to argue that Buddhism is agnostic-atheistic says more about the speaker and conditions from which s/he speaks than it does what Buddhism 'really is'. Keeping this in mind has been helpful for me. It has helped me to better appreciate the depth and complexities of Buddhism, reminding me to be on guard against reifying the sublime Dhamma as this or that. It has also helped me gain some perspective on such recurring debates as whether Buddhism is a religion or philosophy, whether rebirth is literal or not, whether Buddhism is agnostic or atheistic, whether the so-called supernatural elements in Theravada or Mahayana are superflous to the Buddha's 'original' teaching or not, and so forth. Being historically reflexive has helped me not to get so hung up about these never-ending, circuitous arguments, and thereby freeing up more energy to pursue the Dhamma in more productive and skilful ways.
To pick up on the key question underlying this discussion which clw_uk has posed: What is wrong with interpreting Buddhism as agnostic or atheistic? I would say that there is nothing inherently wrong with it. The issue, rather, is whether one is critically reflexive about one's position and whether one pursues that interpretation towards skilfull or unskfill ends.
FYI: For critical analyses of Rhys-Davids and the early western scholarship of Buddhism, Lopez's book mentioned above is helpful. Judith Snodgrass' (an Australian Buddhist historian, btw, whom I had the pleasure of meeting) 'Defining Modern Buddhism: Mr and Mrs Rhys-Davids and the Pali Text Society' is another useful source, as it David McMahan's The Making of Buddhist Modernism
Hope this is of some use......