"how do we reach the masses of former Catholics that are now convinced that the Church is nothing but a 'sunshine-happy cult'?"
Send them all to the seminary.
No, actually, I don't know what can be done. Evangelization is not a programmatic enterprise. I do believe one thing, though. Secularists can smell inauthenticity like old Payless shoes. And inauthenticity can come in two kinds--the kind we're familiar with, and the kind our parents were familiar with.
The inauthenticity we're familiar with is what gets called "Catholic-Lite"--the supersaturation of the happy cute in most average Catholic parishes, where transcendence has been so long smothered that the entire community is like one big institutional group hug. And maybe a round of the Hokey Pokey.
The inauthenticity our parents were familiar with (maybe not my parents, who are older, but most other folks', like embittered Generation X'ers) is kitchy plaster Catholicism--represented by stilted, off-key singing of soulless catechetical hymns, mass produced plaster statuettes of heaven-gazing saints who look as though dirt would just leap off of them if it touched them, and shrill, purity-obsessed moralism in homilies, as though we had nothing better to do than brood during our Suday afternoons.
Both of these inauthenticities are rabidly anti-intellectual; and in truth, I've found that secular-leaning teenagers have appreciated nothing more than my willingness to wrestle with any questions they gave me, on an intellectual level; and to research it if I couldn't deal with it right then and there. People want brutal honesty, they want depth, and they want the person they're talking to to be (duh) authentic--which in our case means genuinely prayerful and reverent. On the purely natural plane, those are the things I lay emphasis on when I do catechesis with teens and adults.