Grace or Works?

There has been a battle among Christian religions regarding the place of grace and works as they relate to salvation. I have heard extreme explanations regarding both. One denomination believes that with a simple declaration of faith that the grace of God will save a person, nothing else. One the other extreme there are some that say that you need to doing all manner of good works in an effort to earn your salvation, somehow working your way to heaven. I feel that any extreme takes you away from the truth.
I believe that both grace and works are necessary in our Heavenly Father's great Plan of Salvation. That is why both grace and works are discussed through out the scriptures. But what do we mean by grace and what do we mean by works?
Grace in this context refers to a gift from God through no merit of our own. Works refers to the deeds done by people while living their lives. So how does this fit together? If you have to do good deeds then there would seem to be some form of merit earned but Grace is a gift through no merit of our own. Here is how is works in my mind...
Jesus died so that we could live again (resurrection). Every person born into this work will die and every person, whether good or evil, male or female, old or young, etc., will be resurrected. It is a free gift to every member of Adam's family, a gift from God through no merit of our own. Therefore it is through the Grace of Jesus that we are saved from death through the miracle of resurrection. It turns out that those who believe this are absolutely right but they generally forget to explain what we are saved from and mistaken think that we are saved from hell (a hot place of fire and brimstone, or something like that).
After we are resurrected we will stand before God to be judged for our works, whether they be good or whether they be evil. Those who have done what Jesus asked of them, repented of their sins and strived to live a "Christian" life will be rewarded with a place at the right hand of God and will gain entrance to "heaven." Those who have rejected the teaching of Jesus and been evil will be rewarded for their deeds with a place on the left hand of God; these people will realize too late that they could have been blessed by following Jesus and will be in a state of anguish which can be termed a "hell."
This is the part that most people don't fully understand, the reward system relating to your works and deeds in life. Obviously no one has ever been perfect except Jesus so no one can qualify for the right hand of God on their own. But because Jesus suffered the atonement for our sins, those who accept Jesus can be forgiven and have their sins washed away. This is done when one declares their faith in Jesus, are baptized for the remission of their sins, receive the gift of the Holy Ghost (which will tell them all things that they should do), and exercise their faith in Jesus by trying their best to live their lives as Jesus would have them do (good deed and works). These people receive the highest reward and will be with people like Abraham, Moses and Jesus. Those who live okay or mediocre lives also are reward for the good that they did do but they don't deserve to be rewarded the same as the great prophets of old; these people are already going to be resurrected and they will be blessed in heaven but not to the same degree and those who completely followed Jesus. Finally, those who might be termed evil have done some good in their lives and deserve some measure of blessing however small that may be.
There are a relatively few that will truly deserve "hell" and have disqualified themselves for any blessing at all. This group is so small compared to the rest of humanity that I won't spend time discussing it now.
So we can discover that neither the grace only group nor the works are necessary groups are absolutely correct. We can only be saved by the grace of Jesus. And if we truly have faith then our works and our deeds will be manifested through out our lives.