Religion like all ideologies based on extreme levels of certainty, whilst not being the cause of human suffering certainly does not help the situation. As a tool of manipulation it (along with nationalism) is one of the most powerful tools to get the masses doing what you want, good or bad.
To reduce the religions impact on government by promoting the separation of church and state is the only logical step forward if we're to live in societies that have multiple religions and non-believers living together. Any step towards sectarianism will simply embolden the majority theology and potentially lead to not only the chrushing of secularists and atheists but also minority religions when push comes to shove.
Better to reduce its impact on society as much as possible, at least in regards to how easy it is for a religion to overtly manipulate the masses. Keep it private and separate from government I say!
