Just make sure if you sprinkle it on someone that they know you're doing it. A few years ago our priest was doing a house blessing, and as he was using the holy water he hit my then-3 year old in the face. Let's just say that it suprised her and she did not react well.
Regarding explaining holy water to a baptist... I think part of the issue is the question of whether God uses inantimate objects to impact people's lives, and other similar phenomena. Perhaps you could start with some biblical examples that would support the Orthodox position, such as...
"And God wrought special miracles by the hands of Paul: So that from his body were brought unto the sick handkerchiefs or aprsons, and the diseases departed from them, and the evil spirits went out of them" - Acts. 19:11-12
"And believers were the more added to the Lord, multitudes both of men and women. Insomuch that they brough forth the sick into the streets and laid them on the beds and couches, that at least the shadow of Peter passing by might overshadow some of them. There came also a multitude out of the cities round about unto Jerusalem, bringing sick folks, and them which were vexed with unclean spirits: and they were healed every one." - Acts. 5:14-16
However, in using these passages I think it'd be important emphasise that you are not trying to say that your priest is like Sts. Peter or Paul, but only that you are trying to show that sometimes God uses unusual means to achieve his goals, and that sometimes even a physical object can be used if God so desires. Of course, that might bring up the question of where Scripture mentions water in particular being used, and that's perhaps a bit tougher. Maybe you could mention the passages which speak of the importance of baptism, but I suppose she'd probably say something about baptism merely being "an outward expression of an inward change," or something along those lines. ...Would she be open to considering what the early Christians said about baptism, or is she more along the lines of a sola scripturist?