A few years ago I was chatting with a christian friend, who happens to be a psychiatrist. In the course of the conversation, he asked me how I was "doing" emotionally. I said, to this effect, I was having a difficult time living up to my ideals and that was discouraging to me.
He replied, "Well, it appears to me you preach a most biblical doctrine of grace, but actually practice legalism in your personal life. You believe that others will be saved by grace, but you seem to believe you will be saved by works." Of course, I protested, but later, indeed with some pain, I realized the indictment was truer than I would like to believe.
As far as legalists being lost, I suppose that would mean all of us, because I fear even the best of us do not appreciate or understand how powerful and effective the Lord's Work of Grace is. No doubt we are all grateful that the business of saving is God's business, not ours. In the same way, none of us are in charge of who is lost. That's not my department, nor yours.
The nature of our rhetoric in the CofC is dialectic, immediately to polarize any question, so that whatever topic emerges is "either" - "or." If one preaches grace, he or she must be saying all legalists are lost. If one preaches law salvation, well, naturally all "gracers" are lost. Yet, since most of us contain quite a mixture of each of these, God must operate at a higher, more synthetic level than we are capable of, and that is a very good thing.
Still, one must hold to this, it seems, it is not my perfect belief in grace that saves me, rather it is the Perfect Lord! We are not saved by faith in faith, or faith in grace, or certainly not by faith in law, but by faith in Christ.