The title sums it up: I often hear it said during the debates on liturgy and music styles that are appropriate for worship that even Luther used common bar tunes (equivalent to days pop songs) for his hymns. Is this true?
Nope, it's not, actually. Luther used a form of music "bar form", but he was actually opposed to use of common tunes (like Calvin) for his hymns. The following is from an essay called "Major Forms of BS" by T. David Gordon:
I cannot count the number of times I have heard the common myth about Martin Luther employing the tunes of familiar “bar songs” in his hymns. This is entirely false, and its utter falsehood is only partially explained by confusion, because Luther did indeed, at times, employ what musicians call “bar form” (an AAB structure), a common musical form in classical and sacred music. Luther wrote many of his own tunes, and borrowed others from Gregorian chant and elsewhere, but not from taverns. Here’s what the good friar actually said:
“I too, with the help of others, have brought together some sacred songs, in order to make a good beginning and to give an incentive to those who can better carry on the Gospel and bring it to the people…And these songs were arranged in four parts for no other reason than that I wanted to attract the youth (who should and must be trained in music and other fine arts) away from love songs and carnal pieces and to give them something wholesome to learn instead.”
[Emphasis mine, from the Forward, first edition, of Johann Walter’s Wittenberg Geistliche Gesangbüchen, 1524. Cf. also the discussion of this matter in “Luther and Bar Song: The Truth, Please!”, chapter 21 in Paul S. Jones, Singing and Making Music: Issues in Church Music Today (P&R, 2006), pp. 171-178].
Additionally, one of the most famous songs set to a drinking song is "The Star Spangled Banner."
Finally, back to Luther. While he did not set sacred music to drinking songs, he is credited with saying, "Beer is proof that God loves us and wants us to be happy."
Update: At least according to this source I appear to have fallen for a popular mis-attribution. That said, it is a fairly common one.