They EXPECT you to make a counter offer. If you don't they'll think you're a pussy. As for 10 or 12%, and they'll come back with 5 or 6%, and take that. You need to cash in on this now, because from here on out most raises are going to be like "merit increases" and it'll be your standard 3 to 5 % a year, no matter how much you make now. You need to make this one count.
Also, don't ever EVER tell the truth about how much you currently make when you're interviewing outside. Always inflate that number. They have no way of knowing anyway. It'll give you more leverage when it comes to talking salary.