Was ancient Judaism legalistic--degenerate, overly-scrupulous, self-centered, prideful? Yes. Not because it was Jewish. Because it was human.
The way to address what has rightly been seen as quite ugly anti-Semitism in twentieth century Paul studies is not to exculpate Judaism but to thrown in all the other religions, indeed the rest of humanity, with it. Indictment of pride and self-focus in everyone, not exoneration of Judaism, is the way forward in understanding Paul and the New Testament. Don't make Judaism better. Make everyone else worse.
Ancient Judaism is simply a picture of what happens when the utter clarity of divine demand interlocks with human fallenness--fallenness both in its failure to keep the law and its self-reliant success in keeping it (yes I think Bultmann took this too far). Jews are not legalists because they're Jews. Jews are legalists because they're human.
And such legalism is alive and well in Christianity, not least in my own denomination, the PCA (a group which I love dearly and for which I bless God). If I'm honest, I can bring it even closer to home. The worst legalist I've ever known or read of or heard about is the one who stares back at me in the mirror every morning. Which makes grace that much more beautiful.
Anyhow, I'm reading Dunn's Theology of Paul and had to get that off my chest.