What is the ruling on sending blessings upon the Prophet in the form: "O Allah, send blessings upon the Prophet as You and Your angels send blessings upon him, O Most Gracious, Most Merciful, and grant him the best of peace"?

The wording of the prayer upon the Prophet (peace and blessings be upon him) mentioned in the question, "O Allah, bless Muhammad as You bless him," is permissible and there is no objection to it. The Quran has indeed stated that Allah and His angels send blessings upon the Prophet. However, it is better to pray upon him with the wording that has been narrated and which he taught his companions.