Pilgrim,

I think the concept of "covenantal succession" supposes the salvation of the ancestors extends to their progeny, which is by the grace of God through the covenant made with Abraham.

This verse doesn't contradict this concept, but could be used, if wrongly interpreted, to support the concept.

"Born of God", if through covenantal succession, could be twisted by extension to mean "born unto salvation because of a covenant made with their ancestors." "Not of blood" could be wrongly thought to mean "not of the blood of Christ." Do you see my point?