I vaguely recall when David Waltz began bringing the validity of this quote into question. At the time, I recall thinking, "um... and?" To view Waltz's research on this, see this link.
I think Waltz has realized that the sentiment of the quote is indeed Luther-esque. There isn't much to really quibble over. In fact, if you go through What Luther Says by Ewald Plass, you can find quite a few quotes that say things like: "If the article of justification is lost, all Christian doctrine is lost at the same time" (W 40 I, 48); "This doctrine [justification] is the head and cornerstone. It alone begets, nourishes, builds, preserves, and defends the church of God; and without it the church of God cannot exist for one hour..." (W 30 II, 651); "When the article of justification has fallen, everything has fallen" (W 40 I, 72).
Waltz quotes Luther stating:
In this epistle, therefore, Paul is concerned to instruct, comfort, and sustain us diligently in a perfect knowledge of this most excellent and Christian righteousness. For if the doctrine of justification is lost, the whole of Christian doctrine is lost. And those in the world who do not teach it are either Jews or Turks or papists or sectarians. For between these two kinds of righteousness, the active righteousness of the Law and the passive righteousness of Christ, there is no middle ground. Therefore he who has strayed away from this Christian righteousness will necessarily relapse into the active righteousness; that is, when he has lost Christ, he must fall into a trust in his own works. (Martin Luther, Luther’s Works – Volume 26: Lectures On Galatians 1535, trans. Jaroslav Pelikan, p. 9.)
Waltz can at least conclude from his own research that the phrase was not coined in the early 18th century (1718) by Valentin E. Löscher. Such people like R. Albert Mohler, Jr conceded this point too hastily:
"I acknowledge the point made by Richard John Neuhaus that the first recorded use of this formulation is found in Valentius Loescher, who in 1718 used it to correct the Pietists. I reject his further claim that this formulation indicts contemporary evangelicals qua evangelicals. It certainly does indict those who claim to be evangelicals, but who preach a gospel of health, wealth, prosperity, consumerism, self-esteem, or good works" [Southern Baptist Journal of Theology Volume 5 (vnp.5.4.4) p. 11 footnote 21].
Tfan demonstrated the quote does indeed go further back. Perhaps Mr. Waltz can enlist the expert Catholic research team of DA, Steve Ray, and Paul Hoffer, who together spent quite a lengthy amount of time (well, not Ray, that's for sure), verifying my charge that Steve Ray misquoted Luther, and in fact hadn't even read the context of the quote he cited.
I highly recommend TFan's research!
Update: Tfan directed me to page vii in Alister McGrath's Iustita Dei (available here). see footnote 1:
For the sense and origins of this celebrated phrase, see F. Loofs, “˜Der articulus stantis et cadentis ecclesiae´. It is necessary to challenge Loofs upon several points, particularly his suggestion that the phrase is first used in the eighteenth century by the Lutheran theologian Valentin LÂ¨oscher in his famous anti-Pietist diatribe VollstÂ¨andiger Timotheus Verinus oder Darlegung der Wahrheit und des Friedens in denen bisherigen Pietistischen Streitigkeiten (1718″“21), and is restricted to the Lutheran constituency within Protestantism. This is clearly incorrect. The Reformed theologian Johann Heinrich Alsted uses the phrase a century earlier, opening his discussion of the justification of humanity coram Deo as follows: “˜articulus iustificationis dicitur articulus stantis et cadentis ecclesiae´ (Theologia scholastica didacta (Hanover, 1618), 711). Precursors of the phrase may, of course, be found in the writings of Luther himself ““ e.g., WA 40/3.352.3: “˜quia isto articulo stante stat Ecclesia, ruente ruit Ecclesia´. For more recent reflection, see Schwarz, “˜Luthers Rechtfertigungslehre als Eckstein der christlichen Theologie und Kirche´.