Nietzsche was right, the priest in the story wasn't right. Apparently this priest was a member of a heretical "church", so he was like the pharisees. He taught but had no means to heal the corrupted human nature.
People in the real Church (the Orthodox Church) are given grace. They improve themselves all the time. But at the same time God helps them be unaware of their improvements. When someone becomes haughty about some "achievements", then God takes away His grace and allows him to fall in a (carnal) sin. Therefore, the real Christians don't see their improvement but only their sins and so they never label other people as sinners. Nobody is ostracized as a sinner, unless he becomes a bad teacher who corrupts other people.
