I have begun teaching a Sunday School class around the book of Galatians. I have had a great deal of exposure to the Law, both from the legalistic and condemning side, and also from the liberal "above the law" mindset. I've sat in both seats, so to speak. Because of that, I've become very passionate about what role the Law is supposed to play in one's life. I haven't nailed down all the details, but I believe the Law has different purposes for different people.
The Unbeliever: For those who do not follow the Lord, those who do not repent and seek the Lord and His righteousness, the Law is a very heavy burden indeed. The Law demands perfection, and at the same time condemns the unbeliever for not attaining that perfection. At first glance it seems a cruel irony -- tell a man he must be pure and blameless if he is to enter the Kingdom, then remind him that he's already filthy. But as Paul states in Romans 7, that is the very purpose! Unbelieving, we are in fact very filthy, and have no part in God and His Kingdom. God provided the Law so we would become convinced of our errors and seek reconciliation, purification, and healing. That said, when an unbeliever comes to grasp with the fact that God demands perfection but he (the unbeliever) hasn't made the cut, horror should overtake him. If not, I dare say that person either doesn't have a grasp on how high the bar is, or he doesn't have a grasp on how far short he's come.
It is because of this that we can start to imagine the Law as a Good Thing. It is a blessing from a loving God who wants us alive and clean. Had He not provided the Law, then we would never know we were law-breakers, and we'd never know we need to seek reconciliation, and we would perish in our sin, forever separated from a Holy God.
The New Believer: Once a man reaches that point of horror, he is ready to abandon the life which has brought him destruction, to take up his cross, and to follow the Lord. The Law takes a new significance. No longer does it condemn the Believer, but now it provides boundaries -- Don't go out into the street; stay away from the fire; don't drink the window cleaner. His flesh may for some time scream out in rebellion as it is ripped from its habits and comforts, but the rules will protect the Believer from harm. He is young and foolish, but now he is growing!
The Mature Believer: Here we find the time-tested, faithful, mature man of God. It is in this circle that Christ longs for His Church to enter. The Law no longer serves any purpose for this man. It doesn't condemn, for his actions are a constant service for his Lord and God. It doesn't provide boundaries anymore because this man walks by the Spirit and the wisdom of God. He may now go into the street because he knows how to avoid danger. In fact, he may now be an effective minister and aid to those who are wounded and in danger in that very street. He can go near the fire because he knows how to not get burned but to cook and to create heat -- he can give food and warmth to those in need. Immature believers look on and scream, "Stay out of the road!" or, "Get away from that fire!" But they do so because they do not understand. They have not learned yet how the fire may be used for good or how the street may be safely navigated to save the Lost. The unbelievers now see a man who is truly free -- free to serve, free to render aid, free to love. It is to these Mature Believers that the World will be drawn. It is these Mature Believers who will train up the Immature in righteousness. These Mature Believers will exercise grace and patience when dealing with the Immature, training them carefully as to why the Mature can use the fire but the Immature cannot.
Sadly, most of the World is in the Unbelieving category. The Law must do more work condemning those people. This is where we get liberality and licensiousness. Many, many people who are in the Church, though, are in the Immature category, and quite content remaining there. Those people cling to their ruleset and demand adherence to the rules by everyone else around them. This is where we get legalism. We who wish to become mature must spend our lives wholly (not just in little pieces here and there, say, Sunday mornings) in the Word, renewing our minds, banishing bad habits, always talking of the Lord and His ways and His Kingdom. We must learn of the Spirit, follow Him shamelessly, do anything and everything He asks of us. We must humble ourselves, love God with all our being, and love all our neighbors enough that we would die for them. And once we're there, the Law has no place in our lives, though we obey it in every respect -- both the letter of the Law and, more importantly, the spirit of the Law.