(Forgive my spelling and typos, I have a lot to say and my spellchecker program is not working properly. And I'm sorry this will be so long and go far beyond the actual question. I'm happy to answer more specific questions if you have them, otherwise I tend to ramble.) Mormons don't believe that Joseph Smith's teachings are false, they believe he truly saw God and Christ in a vision which hearalded the restoration of what they believe to be Christ's true gospel. And in some way they believe that Christ's atonement is necessary for salvation (though only the most basic salvation, not exhaultation into the highest levels of their heaven, which require temple ordinances and a temple marriage to achieve.) I was a Mormon convert at 16. I had been raised without religion and had practically no knowledge of Christ's work or basic Christian belief. I was seeking God, but living in the middle of Utah guess what I ran into? And I felt a great need for God's forgiveness in my life and Christ's atonement from the Mormon perspective was the first I heard, and it was absolutely a message of hope. Later I learned more about the church's beliefs, and was under the impression that they may be the only ones who knew about this amazing gift from God, after all I kept hearing that they had God's restored truths which had been lost to mankind, that Christians were stumbling around with a form of belief that had been changed by man countless times since Christ's earthly ministry and so much truth had been lost. So I bought it all, and joined the church. Now I started having doubts about the church within a year, but I didn't know what my doubts were founded on. Later as things progressed and I discovered internet forums I started to learn about the hugely problematic history of the LDS church, from the Book of Mormon anacronisms and blatant plagiarism to white washed versions of their foundational history (including several different first visions account that were so varied there is no way to believe what Joseph Smith truly thought he saw, if anything - definitely not God the Father and Jesus Christ as 2 separate and distinct personages, which is where they base their view of the Godhead and diminish Christ's divinity). I left the Mormon church before the CES Letter came out, but I've read it and it is a good resource, and there are countless Mormons learning things the way I did and leaving the church. The real problem is that they are leaving the church AND religion as a whole. I have so many friends who have left the church and have lost all belief in God. I myself was incredibly mistrustful of religion for a very long time, but just like before I became a Mormon, God was drawing me to Him. It was really hard figuring out what I could trust (even with the bible, because it had been drilled into my head as a Mormon that we "believe in the bible, so long as it was translated correctly" - they only use KJV published by the church (to include their own footnotes) and any modern translations must be full of false teachings, rather than just being more readable or whatever). It was really hard figuring out what specific terms meant and what the LDS church had skewed. For me the "atonement" was what Christ had done in the Garden of Gathsemane when he prayed. Mormons believe when Christ prayed in the Garden that he was suffering for our sins and sweat blood from every pore, that is when he took the iniquity of mankind upon him. There is absolutely no understanding that in His death Christ broke the chains of death that enslaved us all.
Grace is another thing I had no concept of, I don't remember it being a part of my vocabulary, though I know other mormons who do use it. I knew that if I sinned I had to confess my sin (if it was bad enough I had to confess it to a mormon bishop). I knew I couldn't partake of the sacrament or participate in temple work until I'd been granted forgiveness. And I experienced the control of a bishop over my forgiveness though I knew from my own prayers of repentance that God had forgiven me, that bishop withheld his "approval" of my forgiveness for many more months. I knew I had to do good works, serve in the church, read my Book of Mormon daily, say my prayers, pay a full 10% tithing, do temple work, so on and so on to achieve my place in the Celestial Kingdom, nowhere in there besides that initial moment when I was baptized and my sins where washed away, and those moments of desperate, controlled repentance, did Christ's work come into play for my acheieving exaltation.

I've been out of the Mormon church for about 5 years now, and most of that was spent processing my way of thinking away from Mormonism. I've been a Christian for a couple of years now, but really understanding what that means for my life has only happened in the last 6 months (when I finally felt I could trust a Church without trying to read up on it's foundational history or try to dismantal it's beliefs or doctrinal statement). I still have no idea how to talk to my Mormon friends about Christianity.