Phluther Philosophers! Can you help with a church-and-state conundrum?

Yes, this was brought about by the German circumcision controversy. No, it’s not about who was right.

The German circumcision controversy underscores a major issue in the Church (for lack of a more appropriate catch-all term)-State relationship: jurisdiction.
In this case, it’s a prohibition of an ancient practice in an ancient religion that’s really keen on ancient traditions; other examples exist or can be thought of – one need only imagine banning some other religious practice.
One authority commands X, another forbids it, and the worshiper is required to either abandon his God or defy his earthly rulers. For you non-religious sorts, imagine being a kid whose parents give conflicting instructions on an important issue. If he is devout, he’ll choose his God. If he isn’t, he’ll comply with the State.

So I ask you: what does this mean for freedom of religion? What would become of the devoutly defiant? Doesn’t this mean that there can’t really be a separation of Church and State in any practical sense?

Could we built a system that would permit allegiance to both?

Should secular people who do not appreciate the religion in question really be permitted to make any sort of law or ruling regarding the practice? I know for a fact that secular people don’t like having religious people telling them what they ought to do.