Whare are we heading?! Should we be?

So... these last few weeks, well months, have been...interesting? In alot of my studying I have returned to focus on the basics of the cross, salvation, our justification and all topics and doctrines that are associated. This has been due to a strong sense of my own total unworthiness in relation to the absolute worthiness of Jesus and His holiness and the need to focus on Him and what He has done. It has been an attempt to break away from my very common and regular tendency to slip into a mode of "earning my way" with God, among many other reasons.
It has been both an encouraging time and a frustrating time. Encouraging because I have been reminded that all that does matter and is important is the work of Christ on that cross and not His work supplemented by my effort. The most powerful reminder has come from the book of Romans in chapter 3. From chapter 1 verse 18 to chapter 3 verse 20, Paul outlines and, in thorough detail, sets before us God's indictment of the human race because of our sinfulness and rebellion against God. And this indictment is a universal condemnation as we see in chapter 3 verse 23 when he says "for all have sinned and fall short of the glory of God" (ESV). Then he moves into verse 21, following his summary in verse 20 ("For by works of the law no human being will be justified in his [God's] sight"), with the words "But now"- I love this transition because we know that something great and good is coming! "But now the righteousness of God has been manifested apart from the law...the righteousness of God through faith in Jesus Christ for all who believe". Nothing can be more encouraging- the righteousness of God apart from the law (we can't keep the law Rom 3v10-18), available through Christ (meeting the demands of God's holy justice) and accepted by faith! We can be free and it is not dependent on us! "So if the Son sets you free, you will be free indeed...There is therefore now no condemnation for those who are in Christ Jesus"- John 8v36, Romans 8v1.
Now after reading such glorious truth, you might be wondering how I meant it has been frustrating? The more I have lifted my eyes off myself and my own accomplishments and achievements and focused on Christ and His complete and perfect work, the more I have seen my own sin and failure. The more liberation I feel and know from the need to "earn my way" and just to long to live to say thank-you and please Jesus, the more evil I see in me. In some way, I guess, it is an echo with Paul when he says "So I find it to be a law that when I want to do right, evil lies close at hand" (Romans 7v21). Jerry Bridges, in his book "The Pursuit of Holiness", said in relation to Romans 6v6-7 "Many Christians have a basic desire to live a holy life, but have come to believe they simply cannot do it...The promise of Romans 6v6-7 seems impossibly beyond them. The strong commands of Scripture to live a consistently holy life only frustrate them...In our search for answers to our sin problems, a troublesome question arises: 'What should I look to God for and what am I responsible for myself'". Now, I understand that our frustrations and struggles and temptations come at different and varying levels and degrees, but what do you think is the answer to Bridges' "troublesome question"? What do you think Paul's answer and response was to that same "troublesome question"?