I think you are trying to reverse-engineer a defense for Luther's position, or your formation has been led by those who have. It is not a coincidence that the "Q" school, Freud, Marx, and Hegel (and even the more Catholic Heidegger) all spoke German; theirs is a natural extension of Germany's incumbent religious beliefs, which are from a very seperate culture from the Anglo-Scot-Dutch cultures that shaped America's protestant religious tradition.
The protestant "religious right" seems unaware that the protestant "religious left" comes from the same traditions as itself. (The Catholic "religious left" is more a reaction to hardships of the political and religious isolation of the industrial revolution, and the invidious, pernicious corruption introduced by the French, Mexican, and Spanish revolutions. One thing I think conservative Catholics (Thomas, Roberts, Scalia, etc.) deserve credit where they sometimes get blame is that they still understand the catholic left.)
The Catholic church held that both faith and works were signs of grace, and that they inherently led to each other. Luther rejected this. He also, like Freud, Hagel, and Marx, also rejected reason, whereas the Church Fathers defined the "catholic faith" as innately unified through reason. To Luther, reason was a stumbling block, and worked to convince Man that he was unworthy of God's love. Luther, therefore, believed that an experience of redemption, as witnessed through a healing from sinfulness, was a necessary part of the process of experiencing God's love.
It's not that he believed that sinning results directly in grace, but he believed in something close enough that he felt it necessary to clarify that point in the Small Catechism and elsewhere. It's that he felt that the temptation to sin was a result of a lack of faith and that having faith was the only issue. Luther's point, which was adopted by Freud and Hegel, was that the fear of the sin prevented the experience of grace. One shouldn't sin for the mere sake of sinning, but if fear of sinning held one back from doing what one must do to experience grace, than the person should not fear sin at all.
The problem with this is that Luther expected that the Catholic Church's religiosity was the only thing that made sinful people shameful. Destroy the source of that religiosity which he considered false, and Luther believed that you would destroy that shamefulness. In this, he was in near-perfect accord with Freud. Unfortunately, the true human condition is that we can innately be ashamed, and that the experience of greatly sinful acts can result in a state of "scandal."
"Scandal," as used here and by the Catholic Church, is a state where psychological and spiritual harm have resulted in a soul which is resistant to evanglization and accepting of the Love which is true precursor and fulfillment of both faith and works.
If you search, you will find me asserting that the sexual-abuse "scandal" of the Catholic church ("scandal," here, fulfills both the classical and modern use of the word) is nothing new. I believe firmly that Luther was reacting to sexual abuse he experienced in seminaries; In fact, since gaining such a supposition, I discovered that indeed he did reference "unspeakable horrors and perversions" which went on the seminaries, and, since he blamed them on celibacy, cannot one safely presume that such perversions were sexual in nature?
I believe that receiving such horrible, sinful, abuse made Luther incapable of successfully dealing with the rigors of celibacy, as Pope Benedict XVI and John XXIII both warned would happen if sexually unhealthy persons enter the priesthood. I further believe that what Luther needed was an experience of pure and unconditional love. I believe that what Freud could not recognize was that a fourth fixation exists, sexual fixation, and that he could not recognize it because he was in the midst of it, and that Luther, also, was sexually fixated. I believe that Luther is a very pitiable, even empathetic man, who sought only assurance that God did indeed love him, and was angry at a Church which was incapable of communicating that love to him. I believe that as a Catholic, I am compelled to believe in the possible redemption of such a man, in spite of what horrors he may have unintentionally released, and I am urgently led to pray for him by the church when we pray, as a church, for Jesus to "lead all souls to heaven, especially those in most need of [His] mercy." I believe that Luther was wrong, but was driven to his positions by the inadequacy and sinfulness of the representatives of His church, who are protected as a collective from proclaiming false doctrine, but not from performing unspeakable acts of wickedness.
Protestants will never shake the faith of truly spiritual Catholics with ad-hominems against the Church. As one faithful and, yes, very Catholic, church father said, "the highway to Hell is paved with the skulls of bishops."