This from Jared Wilson at The Gospel-Driven Church. It would be a good discussion starter, anything else that could be added?
What Legalism Isn't (and Is)
This is not exhaustive, of course.
Legalism ISN'T equating Christianity with conformity to Christ. ... But it IS equating Christianity with a particular "brand" within his movement.
Legalism ISN'T any preaching of the Law or of moral exhortations (in their biblical context). ... But it IS preaching "do's and don't's" as if they are the essential message of Christ or of the Bible.
Legalism ISN'T any expectation of obedience. ... But it IS an expectation for all Christians of uniformity of conscience and culture.
Legalism ISN'T applying the demands or the spirit of the Law to one's conscience. ... But it IS extrapolating one's personal conscience out to require the same of another's conscience.
Legalism ISN'T just a preaching of "Don't do this or God will be angry." ... It IS ALSO a preaching "Do this and God will be happy."
Avoid and rebuke legalism with a dogged insistence on the all-encompassing sufficiency of Jesus Christ
3 John 8