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Yes, but. It's a phrase I find myself repeating often in life. When my husband asks for forgiveness, I too often respond, "I forgive you, but…” and then continue with a list of my grievances.
Freedom from the Law does not come through personal perfection, it comes through Jesus Christ. The answer is not a better you, but a you who is united to God through Christ.
You say: Since forgiveness depends on faith alone, why must one nonetheless do good works? Answer: If faith is of the true sort, it cannot be without good works, just as no good work can be where unbelief dwells.