In case you forgot, here it is:
If the news story is from the British press and involves the Pope….
DON’T BELIEVE IT.
(And to refresh your memory, here is John Allen’s column from last year highlighting the constant problems with British reporting on Catholic Church matters, especially those involving the Vatican.)
With that in mind, we turn to Richard Owen’s article in the Times which breathlessly informs us

Pope Benedict XVI is to rehabilitate Martin Luther, arguing that he did not intend to split Christianity but only to purge the Church of corrupt practices.

Seriously, people. That’s the lede. A straightforward assertion.
But what’s the story? The only real story?
That the Pope’s annual gathering with former students  – the Schülerkreis – is a seminar in which papers are read and discussed. Past topics have included Islam and Creation and Evolution – the papers discussed at the 2006 gathering on that topic will soon be released in book form by Ignatius.
This year’s topic will be Luther. Period. Cardinal Kaspar is quoted as saying a few things about Luther that hardly anyone would disagree with in Owen’s article, and Owen frames it all in the typical context of the Pope wanting to soften his image and so on, and so on. It’s an amazingly ridiculous article because..remember…this is about….
…a seminar/reunion of Benedict with his former students to discuss interesting issues. It is not an “official” gathering.  It is not magisterial. No definitive teaching will come out of it. It’s an intellecutally high-powered Alumni Weekend at Castel Gandalfo.
This kind of reporting is just amazingly irresponsible.  The theological and historical issues stemming from Luther and the Reformation are very complex and multifaceted, and “rehabilitation” is really not the point.
Who knows what will be said about Martin Luther in the future? Who knows what will happen between Catholicism and Lutheranism?
I’m sure the Pope has said lots of things about Luther in the past, them both being German and all. Most recently, for example, he mentioned him in Spe Salvi, in this rather dense passage related to the meaning of a verse from Hebrews, “Faith is the substance of things hoped for…”

7. We must return once more to the New Testament. In the eleventh chapter of the Letter to the Hebrews (v. 1) we find a kind of definition of faith which closely links this virtue with hope. Ever since the Reformation there has been a dispute among exegetes over the central word of this phrase, but today a way towards a common interpretation seems to be opening up once more. For the time being I shall leave this central word untranslated. The sentence therefore reads as follows: “Faith is the hypostasis of things hoped for; the proof of things not seen”. For the Fathers and for the theologians of the Middle Ages, it was clear that the Greek word hypostasis was to be rendered in Latin with the term substantia. The Latin translation of the text produced at the time of the early Church therefore reads: Est autem fides sperandarum substantia rerum, argumentum non apparentium—faith is the “substance” of things hoped for; the proof of things not seen. Saint Thomas Aquinas[4], using the terminology of the philosophical tradition to which he belonged, explains it as follows: faith is a habitus, that is, a stable disposition of the spirit, through which eternal life takes root in us and reason is led to consent to what it does not see. The concept of “substance” is therefore modified in the sense that through faith, in a tentative way, or as we might say “in embryo”—and thus according to the “substance”—there are already present in us the things that are hoped for: the whole, true life. And precisely because the thing itself is already present, this presence of what is to come also creates certainty: this “thing” which must come is not yet visible in the external world (it does not “appear”), but because of the fact that, as an initial and dynamic reality, we carry it within us, a certain perception of it has even now come into existence. To Luther, who was not particularly fond of the Letter to the Hebrews, the concept of “substance”, in the context of his view of faith, meant nothing. For this reason he understood the term hypostasis/substance not in the objective sense (of a reality present within us), but in the subjective sense, as an expression of an interior attitude, and so, naturally, he also had to understand the term argumentum as a disposition of the subject. In the twentieth century this interpretation became prevalent—at least in Germany—in Catholic exegesis too, so that the ecumenical translation into German of the New Testament, approved by the Bishops, reads as follows: Glaube aber ist: Feststehen in dem, was man erhofft, Überzeugtsein von dem, was man nicht sieht (faith is: standing firm in what one hopes, being convinced of what one does not see). This in itself is not incorrect, but it is not the meaning of the text, because the Greek term used (elenchos) does not have the subjective sense of “conviction” but the objective sense of “proof”. Rightly, therefore, recent Protestant exegesis has arrived at a different interpretation: “Yet there can be no question but that this classical Protestant understanding is untenable”[5]. Faith is not merely a personal reaching out towards things to come that are still totally absent: it gives us something. It gives us even now something of the reality we are waiting for, and this present reality constitutes for us a “proof” of the things that are still unseen. Faith draws the future into the present, so that it is no longer simply a “not yet”. The fact that this future exists changes the present; the present is touched by the future reality, and thus the things of the future spill over into those of the present and those of the present into those of the future.

 More from Carl Olson. This, in particular is helpful:

Two suggestions: First, go over to the Communio website and download a lengthy 1984 interview (PDF format) with Cardinal Ratzinger titled “Luther and the Unity of the Churches”. I’m about a third into it and it is, as usual, it exhibits the sort of careful, exact, and clear thinking for which Ratzinger is rightly renowned. As Fr. Aidan Nichols notes in The Theology of Joseph Ratzinger (T&T Clark, 1988), Ratzinger “finds two figures within the Wittenberg Reformer. First, there is the Luther of the Catechisms, the hymns and the liturgical reforms: and this Luther can be received by Catholics whose own biblical and liturgical revivals in this century reproduce many of Luther’s own criticisms of the late medieval Church. But besides this Luther there is also another: the radical theologian and polemicist whose particular version of the doctrine of justification by faith is incompatible with the Catholic understanding of faith as a co-believing with the whole Church, within a Christian existence composed equally of faith, hope, and charity” (p. 276).