Commenting on 2 Nephi 25:23, Robert Millet and Joseph Fielding McConkie, in vol. 1 of their Doctrinal Commentary on the Book of Mormon, wrote the following, showing that even among those who held a very “black and white” view of things, this passage was never understood in any legalistic/Pelagian sense (while still [correctly] rejecting sola fide):
23. For we labor diligently to write, to persuade our children, and also our brethren, to believe in Christ, and to be reconciled to God; for we know that it is by grace that we are saved, after all we can do.
Salvation—which is exaltation or eternal life—comes through the merits and mercy and condescensions of God: it comes by grace. It is a divine gift made available through the love of the Father and the selfless sacrifice of the Son. There are many things which are simply beyond the power of man to bring to pass. Man can neither create nor redeem himself; such activities require the intervention of beings greater than he.
Satan would have Christians err on this doctrine in one of two directions. First of all, there are those who contend that man is saved by grace alone, and that no works of any kind are of value. Such persons might reconstruct Nephi's language as follows: "We are saved by grace; after all, what can we do?" "Salvation by grace alone and without works," Elder McConkie observed, "as it is taught in large segments of Christendom today, is akin to what Lucifer proposed in preexistence—that he would save all mankind and one soul should not be lost. He would save them without agency, without works, without any act on their part.
"As with the proposal of Lucifer in the preexistence to save all mankind, so with the doctrine of salvation by grace alone, without works, as it is taught in modern Christendom—both concepts are false. There is no salvation in either of them. They both come from the same source; they are not of God." ("What Think Ye of Salvation by Grace?" BYU address, 10 January 1984, p. 49.)
On the other hand, there are those who become so obsessed with their own "works-righteousness," with their own goodness, that they do not look to Christ as the true fountain of all righteousness. Men and women must rely "wholly upon the merits of him who is mighty to save" (see 2 Nephi 31:19). In the purest sense, the works of righteousness which a person performs—ordinances of salvation and deeds of Christian service—are necessary but are insufficient to lead to salvation. No matter what a man may do in this life, his works will not save him: he will always fall short and thus be "an unprofitable servant" (Mosiah 2:21) without the grace or divine assistance of God. Indeed, it is only after a person has so performed a lifetime of works and faithfulness—only after he has come to deny himself of all ungodliness and every worldly lust—that the grace of God, that spiritual increment of power, is efficacious. In the language of Moroni: "Yea, come unto Christ, and be perfected in him, and deny yourselves of all ungodliness; and if ye shall deny yourselves of all ungodliness, and love God with all your might, mind and strength, then is his grace sufficient for you, that by his grace ye may be perfect in Christ" (Moroni 10:32; italics added).
"Salvation is free." (2 Nephi 2:4.) Justification is free," wrote Elder Bruce R. McConkie. "Neither of them can be purchased; neither can be earned; neither comes by the law of Moses, or by good works, or by any power or ability that man has.... Salvation is free, freely available, freely to be found. It comes because of his goodness and grace, because of his love, mercy, and condescension toward the children of men." Continuing, Elder McConkie explained, "Free salvation is salvation by grace. The questions then are: What salvation is free? What salvation comes by the grace of God? With all the emphasis of the rolling thunders of Sinai, we answer: All salvation is free; all comes by the merits and mercy and grace of the Holy Messiah; there is no salvation of any kind, nature, or degree that is not bound to Christ and his atonement." (Promised Messiah, pp. 346-47)
In vol. 4 of the same commentary series, the authors provided the following interpretation of Moroni 10:32, again showing that they did not hold to a legalistic/Pelagian interpretation:
32. Come unto Christ, and be perfected in him] The Saints are commanded to be perfect (JST, Matthew 5:50; 3 Nephi 12:48). We are never justified in lowering the lofty standard held out to the followers of the Christ. Nor are our actions or attitudes approved of God if we suggest that the Savior did not mean what he said when he called us to the transcendent level of perfection. Our task is not to water down the ideal, nor to dilute the directive. Rather, we must view our challenge with perspective, must see things as they really are and as they really can be.
The fact of the matter is that no man or woman except Jesus—not even the greatest Apostle or the mightiest prophet—has ever traversed this mortal sphere perfectly, without flaw. Only the Son of the Man of Holiness stayed on the strait and narrow path perfectly. But he commands us to be perfect. Is is too late for us, given that we have already sinned? No, for perfection is a process, a lengthy process which begins here and continues hereafter. The key principle to be remembered by the disciple of Christ is that perfection is in Christ. Our Lord offers to make us perfect, meaning whole, complete, and finished. Jesus Christ, the author and finisher of our faith (see Hebrews 12:2; Moroni 6:4), seeks to perfect us in the sense that he makes us whole and complete. Without him we are nothing and can do nothing of eternal value (see John 15:1-5). With him we are complete. As Nephi explained, above and beyond all we can do we are saved by the grace—the enabling power—of Jesus Christ (see 2 Nephi 25:23). Stephen E. Robinson has described the process as follows: "Perfection comes through the Atonement of Christ. We become one with him, with a perfect being. And as we become one, there is a merger. Some of my students are studying business, and they understand it better if I talk in business terms. You take a small bankrupt firm that's about ready to go under and merge it with a corporate giant. What happens? Their assets and liabilities flow together, and the new entity that is created is solvent....
"Spiritually, this is what happens when we enter into the covenant relationship with our Savior. We have liabilities, he has assets. He proposes to us a covenant relationship. I use the word 'propose' on purpose because it is a marriage of a spiritual sort that is being proposed. That is why he is called the Bridegroom. This covenant relationship is so intimate that it can be described as a marriage. I become one with Christ, and as partners we work together for my salvation and my exaltation. My liabilities and his assets flow into each other. I do all that I can do, and he does what I cannot yet do. The two of us together are perfect." ("Believing Christ: A Practical Approach to the Atonement," 1989-90 BYU Devotional and Fireside Speeches, pp. 120-21.)
In short, the Master offers not only to change us, but to exchange with us—to exchange his goodness for our sin (see 2 Corinthians 5:21; Galatians 3:13; Philippians 3:8-9; Hebrews 2:9). He came not only to cleanse our souls but also to fill our souls. He came not only to wipe away the stains but also to endow us with his righteousness and his power. He came to perfect us. Thus it is that those who go to the celestial kingdom are those who are "just men [and women] made perfect through Jesus the mediator of the new covenant, who wrought out this perfect atonement through the shedding of his own blood" (D&C 76:69, italics added).
32. Deny yourselves of all ungodliness] This is one of the ways in which we bear the cross of Christ. "And now for a man to take up his cross, is to deny himself all ungodliness, and every worldly lust, and keep my commandments" (JST, Matthew 16:26).
32. Love God with all your might, mind and strength] "To love God with all your heart, soul, mind, and strength," President Ezra Taft Benson has taught, "is all-consuming and all encompassing. The breadth, depth, and height of this love of God extend into every facet of one's life. Our desires, be they spiritual or temporal, should be rooted in a love of the Lord." (The Teachings of Ezra Taft Benson, p. 349.)
32. Then is his grace sufficient for you] "No more heinous doctrine could exist than that which encourages lip service to God but discourages wholehearted obedience and the works attendant to discipleship.... And surely no more diabolical belief could exist than that which encourages the kind of smug self-assurance that comes from trusting in one's own works, relying upon one's own strength, and seeking to prosper through one's own genius. It is an affront to God and a mock of the atoning power of him whom God sent, for man to place himself at the center of things, for him to revel in his own greatness and marvel at his own achievements. Pure humanism is a doctrine of the devil: it places an inordinate emphasis upon fallible man and thus deflects man's vision away from the heavens and the powers of redemption.... The key to understanding this sacred principle—the relationship between the grace of God and the works of man—is balance, balance and perspective provided through the scriptures of the Restoration and the words of living oracles of this dispensation." (Robert L. Millet, By Grace Are We Saved, pp. 72-73.) It is only as we seek to rid ourselves of the taints of this telestial world that we prepare ourselves to receive the Lord's grace, his power and strength, which then enable us to do that which we could not do on our own. President Harold B. Lee wisely taught: "Spiritual certainty that is necessary to salvation must be preceded by a maximum of individual effort. Grace, or the free gift of the Lord's atoning power, must be preceded by personal striving." (Stand Ye in Holy Places, p. 213.)