http://www.chessgames.com/perl/chessgame?gid=1082518
Common French Defense Blunder
5...Ne7 isn't a blunder. White makes the game more interesting with Qh5, main point preventing bf5, but black isn't losing or even worse.
Grandmasters are better than Class A players at weaseling out of difficult positions. The practical reality in tournament games is that my opponents usually don't find a way get out of the noose. Not being able to castle takes them out of a routine pattern and forces them to opt for moves that are much less comfortable.
Houdini 3 Extreme says White maintains a substantial advantage in the line you give with 8. Be3 Nxc5; 9. Bxc5 Bxc5; 10. Nf3 Qd6; 11. O-O h6; etc. According to Houdini 10. ______ h6; 11. Bb5+ is even worse.
According to Houdini, White also maintains a substantial advantage on 8. ____ Nf6; 9. Qg5 etc.
As White I nearly always win after the folloowing sequence when Black plays a plausible but dubious move. Even against higher rated players I still win when this lemon is played:
1. e4 e6; 2. d4 d5; 3. Nc3 Bb4; 4. ed5 ed5; 5. Bd3.
Please go to the following link if you don't know what plausible but dubious lemon I am referring to:
http://cloverchess.com/common-french-defense-blunder