Boy, you are firing on all cylinders this morning.
What is interesting about your post is that Luther refused to reconcile with Zwingli on Zwingli's (proper) 'remembrance' view of the Lord's Supper (as opposed to Luther's 'consubstantiation' -- whatever that means) because Luther held out hope of reconciling with the RCC and felt that Rome could never be completely reformed to the Scriptural view in one step. He felt that his 'compromise' with their 'wafer god' (as you so aptly put it) was a necessary concession to 'compromise'.
Obviously, it didn't work and the RCC marched on in their multiple errors and the poor Lutherans were left with a Scripturally indefensible doctrine.
Amen!
But I believe that the Lutherans have rejected consubstantiation and have moved toward the Calvinistic approach.
That was where Melanchthon was moving.
Maybe some of the Lutheran brethren could clarify their views on the subject.