If you read James in context you will see works are a confirmation of faith as exhibited by Abraham. Would he have been saved if he hadn't been willing to offer Isaac as a sacrifice? Yes he would because God had declared him righteous because Abraham believed God.
you contradict yourself in your post. We're either saved by faith in Christ and Christ alone or we're not. Which is it?
now as Christians are we to produce fruit for the kingdom? Yes we are.
the belief you note in James 2 that the demons have is intellectual knowledge. Do they know who Christ is? You bet. Do they believe He can save/forgive them? Nope. Because they have no faith.
Do you believe Mohammed lived? Of course you do as history records he lived. Does that make you a Muslim? Nope.
can you lose your salvation? Not based on the Bible. Ephesians tells us we are sealed by the Holy Spirit who is given as a pledge of our inheritence. No where does the bible say that pledge is removed from us nor is the Holy Spirit ever removed from us.
if the catholic believes they can lose their salvation, and they do, then they best be living with the priest to beg for his forgiveness on an hourly, if not minute basis.
Christ does not intend for us to live in this state of fear. He loves us so much He has taken our sins and nailed them to the cross....where they remain today.
They were not taken out of context. The context is provided with the quote.
If one who has been saved subsequently converts to Islam, goes on jihad, straps-on a suicide vest and kills themselves and others, and maims many more, will they still be welcomed at the Pearly Gates by the Celestial Brass Band?