When does the separation of church and state become threat to good public policy?

I have been playing around with several thoughts about the separation of church and state. The doctrine of separation of church and state appears to mean different things to different people. This subject continues to be very misunderstood. I did a little internet search and came up with a very nice page, Separation of Church and State Home Page. It makes a persuavise argument for the separationist viewpoint. Their politics slip in here and there but overall the presentation is factual and informative.

The most interesting question that wandered into my brain after reading most of the site is: How much of the federal interpretation of separation of church apply to state governments?

My thought process goes this way. Their site does a nice job explaining the limited role of the Federal government and they make a nice argument that the Constitution does not borrow a lot from the Ten Commandments by saying murder, stealing, etc., are state issues. Then it struck me! When you get down to it, most issues affecting the common man are covered by state law. So why has the federal courts stepped in and made changes on state and local government public policy issues? Is this good law or just an example of federal power? Most of the court cases have been really silly and the only effect has been to make the Federal courts look silly. If the powers of the Federal Government are “few and defined” and religion is not one of the powers defined, why do they seem to be stretching to take on cases that forces their interpretation of church and state doctrine on the states? The polls show that the people believe in the separation of church and state but not to the degree required by the Federal courts. I don't believe that courts should change their decisions because of recent polls but popular opinion ultimately sways judicial opinion. I get this sense of a desire by the Federal courts to try explain their decisions on this law as perfect when the public says something different is required. If a state or local government has a practical reason for including a relationship to religious texts (Ten Commandments text posted in public buildings) or symbols(e.g. cross in the seal for LA) and the people agree, why not let the states and local governments make the decisions on public policies that affect them? This begs the question, does a state have the authority to implement "less strict" separation of church and state view because their need to change the public’s perception to state issues(e.g. murder, quality of local education) is higher than the need of the Federal courts?