What do you mean, God is not gonna judge the world by the 10 commandments???

My wife recently realized the importance of using the Law in evangelism. Since then she puts it in practice whenever she can. A few days ago she had an interesting exchange with her sister about the Judgment Day. My wife was arguing that we are all bad, really have nothing on God and that He is already gracious enough to let us breathe when we really don't deserve it. Her sister replied: Hold on. I'm not evil !?! I'm innocent! My wife went on to ask her a few questions: Ever used the name of God in vain? Lied? Ever stolen something? Looked at a man with lust? Yes! Yees! I got it, I got it ok. My wife wrapped it all up with one last question: So, by your own admission you are an adulterous, lying, blaspheming thief. On the day of judgment upon your own confession, where should God send you? Heaven or Hell? The answer was obvious, the subject was changed and she left the room first chance she had. A couple of days later my wife's sister's husband fell in my wife's evangelistic claws and in no time she was taking her, now normal, evangelistic route when he quickly replied: I don't believe God is going to judge the world based on the 10 commandments . My wife said " ok then" and let the conversation die just to admit to me later that she didn't know how to keep it going. Before I go on with this post, I want to point out that her sister clearly talked to hubby about the conversation she had with my wife and I would venture to say that it had the same effect on him because he was ready to avoid the "Law questions" at all cost even before they started coming. I do have a vague idea on how I would keep that dialogue going. Here's my honest try:

- What do you mean God won't judge the world by the 10 commandments? Let's take a look at them. Stealing for example: Are thieves welcome in heaven? Think about people who steal money from charitable organizations leaving thousands hungry in 3rd world countries. God is not going to punish that? How about coveting the neighbor's wife. Some guy tells you drooling: "Your wife looks fantastic. I'd love to spend a night with her." God is gonna let it slide? Murdering: Hittler murdered 6 million jews. What is God gonna do if He is not going to judge that? My guess is that he would answer yes to all the questions (especially the wife one) de bunking therefore his own previous statement thus bringing us back to where we started. Namely his guilt before a holy God who is a righteous judge. The issue is, you are guilty my dear friend. What are you gonna do about it? Eternity is one heck of a long time and it is closing in every day.