I think a big part of the confusion here is that Catholics and Protestants have different definitions of what it means to be "saved".
Protestants believe that faith alone makes you fully "saved".
Catholics believe that faith partially saves you (what they would call "saved") but then you have to do a substantial amount of good works and participate in many church rituals (sacraments) in order to earn your way into heaven (ie full salvation). This is also why Catholicism has the concept of purgatory, so that partially/initially "saved" people who didn't do enough good works can be prayed into heaven by the living. Protestantism has no such concept because it doesn't make sense in their framework, either you are fully saved or not at all.
So with regards to Ephesians 2:8-9
For by grace you have been saved through faith. And this is not your own doing; it is the gift of God, not a result of works, so that no one may boast.
Protestants interpret this literally, while Catholics would say this is true of (initial) "salvation" but that you still need to do good works and participate in church rituals in order to get into heaven/be fully saved.
To put it in mathematical terms:
grace + faith + Christ = salvation (full)
grace + faith + Christ = salvation (initial)
initial salvation + good works + ritual + other saints + Christ = full salvation (entrance to heaven)
initial salvation - enough works OR - enough ritual = purgatory
So, from a Protestant viewpoint, true salvation is "by grace alone, through faith alone, by Christ alone". They have a huge issue with Catholicism adding works, participation in church ritual, and prayers to the saints as requirements for entrance into heaven/full salvation.
Whether Catholics are actually saved is a debate among Protestants. Some believe that as long as you believe Christ payed for your sins, that is enough. Others would say that believing you need to add works to your salvation indicates you don't think Christ fully paid for your sins, which means you don't actually/fully believe in the gospel and thus are not really saved.
Your quote actually covers both of these bases, all Protestants believe that Catholics need to be called to
true salvation (all faith, no works) but whether those that follow a "false/flawed" salvation (faith + works) are actually saved is controversial and not addressed by your quote (although I certainly can see how you thought that is what it implied). As a Protestant myself, I think you will find most Protestants are less interested in arguing about whether Catholics are actually saved and more interested in trying to get Catholics to drop the belief they need to earn their full salvation.
There is still a decent amount of variability in views even among Protestants that believe Catholics are not saved. Most of these views, however, boil down to aspects of Catholicism that Protestants see as directly contradicting scripture, especially those that pertain to salvation. This includes
- Praying to anything other than Christ or the Father
- Belief that salvation is applied to believers by the church
- Belief that any form of ritual or act is needed to ensure salvation
- Belief that works or human effort need to be added to salvation
- Belief in purgatory
Their view is that belief in any one of these things indicates you do not believe in the salvation that the bible teaches. If you do not believe in the salvation that the bible teaches, then you are not saved.
Probably the most common objection is with regard to works. Protestants will point out that Eph 2:8-9 (and other passages) explicitly mention that salvation is not through human works or effort, and that the Bible goes to extensive lengths to emphasize this as a core aspect of both salvation and saving faith. Since Catholics do not believe this, Protestants view this as rejecting a critical aspect of faith and so they cannot possibly be saved.
Some Protestants even go so far as believing Catholicism is a fundamentally different religion closer to Islam than it is to true Christianity. This is because both Islam and Catholicism teach that salvation is a combination of belief, faith, good works, church attendance, and ritual observance, and that it is impossible to know if you have done enough to merit salvation until you have died and your soul is weighed/judged. This is in stark contrast to what Protestants view as true Christianity: faith alone being sufficient and an absolute guarantee of salvation regardless of your past, present, or future deeds.