The latter.  I'm talking about public displays of religion, which were considered par for the course as expressions of religious freedom, expressed through a majoritarian concept of federalism.
In other words, I'm talking about the incorporation of the First Amendment to the states, who were generally considered their own keepers of religious expression, which included school prayer until recently in American history.
Whether this is good or bad, one can be the judge of.  And your point is noted, that religious freedom and dissent may have benefitted from both incorporation and a lack of federalism.  But the argument was flowing from a point of view that somehow religious Christians have more to say in the public sphere than ever.  They don't.  They're very limited in terms of power, other than PACs and social influence.  And the PACs may have even arisen from this erosion of majoritarian, localized sentiments.  Some say good, some say bad.  I say, "Bah.  There's a trade-off."
I would recommend reading both Walter Berns and Herbert J. Storing to get a better understanding of both concepts should one be interested.
Not you, BB, you've probably got it dialed.
		
		
	 
So you're not a big believer in the concept of separation of church and state?
Are you fine with other religions being given the same freedom to make displays on public property as your religion?
		
 
		
	 
No, I am.  But the 
Constitution Bill of Rights was only supposed to be applied to the federal government, and it was probably more limited than we think today.
The states generally had the right to determine what the separation was, and did so accordingly.  That's the point I'm making.  I'd rather live in this world, today, frankly.  But it's certainly a deviation from the original intentions of even the BoR, IMO.
Plus, there's a trade-off.  At the end of school prayer and ACLU suits, you have the Pat Robertsons and Ralph Reeds of the world seeking political influence in matters other than those that deal with religious expression.
eta*  Gut reaction, too:  a non-denominational prayer at a graduation seems silly to ban, at least to me.  That's as personal as I get.  I'm agnostic.  Never even stood for the Pledge.  Don't care for oaths, public displays of fealty, etc.