Your commentary is dead-on, but also calls for an understanding of the nature of Art--something sadly lacking in the US as a whole.
St. Pius X's observation that Art (especially for worship) must possess Beauty, Goodness, and Universality (truth, in a fashion) flies directly against the au courant "ars pro gratia artis" mentality.
As to the guitar--I think that a classical-guitar accompaniment of (e.g.) "Silent Night" can be used without danger of derogating substantially from the essentials--but my thesis is vigorously disputed by others who are quite knowledgeable on the topic. Frankly, I think this is one of those 'de gustibus' questions--but I share with you a very solid skepticism on use of guitars.
As to Mozart: pointing out his personal faith-problems as a 'bar' to utilizing his sacred music offerings has some danger, because one could then state that JSBach's Lutheranism is similar to your objection. I'm not so sure that Schubert was a really "good" Catholic, either. The list could go on...
That's why Pius X wrote his encyclicals on the topic of Musica Sacra--to get to the essentials of what is/is not appropriate as Sacred Music.
It is also important to distinguish between Sacred Music and hymns--they are two entirely different things and are treated as such by Pius X, for good reason. Strictly speaking, musica sacra is that music written for texts which are either Biblical (OT and NT) OR for the text of the Mass. Hymns fall under a somewhat relaxed standard, because, unlike Gregorian Chant propers (e.g.) hymns do not employ the standard calling for music which 'illuminates' the text. A hymn's melody, harmony, or rhythm may well evoke certain feelings, and that's the purpose of a hymn, along with the implicit catechesis in the text.
Thanks for your clarifying and extending remarks. This has turned out to be a really good thread.
As you know of course, tradition holds that the very first accompaniment of "Silent Night" was by guitar, for lack of a functioning organ.
I'll annoy you by saying that I don't think Schubert's "Ave Maria" belongs in church at all. It's a very nice composition, but really, it's a religious song, not a proper hymn. And again, the problem of technical difficulty presents itself. It's not really choral music, and is almost always performed by a soloist who needs some degree of virtuosity to bring it off -- and solos being individualistic, they undermine the sacramental language of liturgy's call to communion. The whole "Charlotte Church" approach to liturgical music strikes me as radically un-Catholic.
And Bach? Oh, dear. Though a Lutheran, he was a devout, believing Christian, which puts him ahead of Mozart right there. His sacred oratorios are not liturgical, so there's no risk of their turning up during Mass (they have some fine hymns embedded in them, which can probably be made acceptable for Catholic liturgical use). The B-minor Mass is one of the most glorious compositions there ever were or will be, but IMO its baroque splendor overwhelms the liturgy: sung in the course of a real Mass, I fear it would be all about the performance, rather than what's happening at the altar. And the instrumental music? My parish has a goofball organist who every year rolls out the Toccata & Fugue in D on the Sunday before All Saints'. Why? Is he suggesting a halloweenish, Phantom of the Opera association? Why? Once again, it's a piece I love, but has no direct bearing on what what happens at church.