Praise be to Allaah.
Yes, we must make this distinction. The one who rejects the law of Allaah and casts it aside, and replaces it with man-made laws and the opinions of individuals has committed an act of kufr which puts him beyond the pale of Islam. Whereas the one who adheres to the religion of Islam, but is a sinner and wrongdoer by virtue of his following his whims and desires in some cases, or pursuing some worldly interest, but admits that he is a wrongdoer by doing so, is not guilty of kufr which would put him beyond the pale of Islam.
Whoever thinks that ruling by man-made laws is equal to ruling by sharee’ah, and thinks that it is OK to do that, is also guilty of kufr that puts him beyond the pale of Islam, even if it is only in one instance.