How can the creed call the Church "Holy"?

Here's a frequently raised question -- if not explicitly, at least implicitly -- to which I think Peter Kreeft offers a number of suggestive and thought-provoking answers. In what follows, I shall be referring to and quoting from ch. 22 of his book, Fundamentals of the Faith. Kreeft writes:

The Church's second mark is holiness. The creed calls her "the communion of saints." Saints does not mean the opposite of sinners; saints means saved sinners. The Church is the communion (common union) of sinners who have repented and received God the Father, Son, and Holy Spirit. All men are sinners. Some know it, repent, and are saved. They are the Church.

Then comes one of my favorite sentences in Kreeftiana:

There are only two kinds of people, after all: saints, who know they are sinners, and sinners who thing they are saints.

How perfectly well-put, and how true!

But what does it mean to say that the Church is holy? To be holy is to be set apart, consecrated -- something that makes little intuitive sense in an egalitarian Protestant setting where everyone seems recognized as an equal-time sinner. How can the Church be called "holy" when she is so notorious for scandalous sinners? Kreeft's answer involves a metaphysical assertion:

The ultimate reason why we are holy is because, by faith and baptism, we have been really, ontologically united with Christ, the holy one. We are his body: that is no metaphor. These bodies of ours are the metaphors. We are not only his, we are him: cells in his body. That is why Saint Paul sees a sin like sexual infidelity as blasphemous: "Do you know that your bodies are members of Christ? Shall I therefore take the members of Christ and make them members of a prostitute?"

But then comes my favorite illustration in Kreeft's account: a story from Boccaccio, freighted with irony, which Kreeft introduces as follows:

The Church's obvious human imperfections have been an occasion for scandal and apostasy for millions down through the centuries. But paradoxically this very fact is also a powerful argument for her divine nature. This is cleverly brought out in Boccaccio's story of Abraham, the medieval Jewish merchant in The Decameron. Abraham is contemplating becoming a Catholic. He tells his friend, the bishop of Paris, who has been trying unsuccessfully to convert him, that he has to go to Rome on business. The bishop is horrified: "Don't go! When you see the stupidity and corruption there, you'll never join the Church." (This was the time of the Medici popes, who were notoriously worldly and corrupt.) But Abraham is a practical man. Business calls. Upon his return to France, he tells the bishop he is now ready to be baptized. The bishop is astounded, but Abraham explains: "I'm a practical businessman. No earthly business that stupid and corrupt could last fourteen weeks. Your Church has lasted fourteen centuries. It must have God behind it."

Elsewhere, not in this book, Kreeft says that he takes this story, by which Boccaccio meant to poke fun at the Church, as a serious argument in behalf of her authenticity. O felix culpa!