Your argument is well put. I agree that religion has nothing to fear from the secular state. The secular approach allows religious systems to compete in the "marketplace of ideas" along with non-religious systems of thought. And religious systems need not come up wanting, in spite of the competition. There are mystical traditions in Judaism and other religious traditions of the world that are, I believe, rooted in human experience. They simply attend to different aspects of human experience than do, for instance, scientists. A healthy secular state can provide an environment in which we can argue about ideas without (1) feeling the need to kill those who differ with us or (2) finding ourselves in danger of being killed.
from the article: Why Israel must become a secular state: a thought for Yom Kippur 5770