Are Rewards a Valid Motivation for Sanctification?

It seems that every generation of the church sees a struggle to rightly define Christian sanctification.  This happens in part because of the importance of the subject.  Sanctification is the present tense of salvation for those who have believed; it is the salvific address to which our mail is sent in this life.  With this in mind, the two errors associated with this doctrine are among the most deadly.  To be a legalist means to forfeit the peace and joy that comes through the grace of Christ.  To be a libertine is to justify a wayward and messy life instead of living in step with the Holy Spirit as we should.   

How we understand sanctification will further exert a dramatic influence on our approach to Christian ministry.  One question in this regard is the validity of appeals for godliness based on rewards or punishments.  Is the doctrine of salvation by grace compatible with warnings given to Christians or rewards offered for godly living?  For many in the so-called Contemporary Grace Movement, the answer is No.  These preachers teach that gratitude is the only valid basis for holiness.  Guilt-Grace-Gratitude is the only track on which the train of godly living runs.  But is this true?  Are punishments and rewards biblically consistent with the idea of God's saving grace?