Can a truly saved Christian who is living in sin still be happy?
No. A genuinely saved believer who goes into sin cannot be happy. Deep down he is miserable, because he knows he is doing wrong, the Lord is dealing with him, and if fellow believers shun him, that discipline comes home. This is not to be nasty; God has a reason.
Les teaches that if a person has been genuinely saved and then goes out into sin, and the Lord has not yet taken him out as seen earlier in chapter 5, way down deep he is miserable. He cannot be happy. Les says, 'Don't tell me that a sinning believer can ever be happy.' They cannot be happy, because they know they are doing wrong, the Lord is dealing with them, and if fellow believers begin to shun them, it really comes home. This is the purpose of it all; it is not meant to be purposely nasty. God has a reason. If you have acquaintances who are believers, ostracize them for a while, but let them know why, because Scripture admonishes us not to have fellowship with those kind of people who claim to be believers. This is not talking about the world but about believers. Paul says he has no authority to judge them that are without—the lost world. Les also goes back to Romans 8, beginning at verse 6, because this is not just one little quirk of Scripture; it is a continuing doctrine throughout Paul's letters on how to behave as a believer, practical everyday living for believers.