I am afraid the author is correct about the sorry state of affairs in my country. It has happened in a short time, so short that now is the government going to allow homosexual marriage, and although they are omitting the church from having to perform them, many politicians want to allow those priests that do want that to do so, whatewer the will of the church itself.
This is the problem by not having a clear distinction between church and state. But the problem is not in the definition of Iceland as a culturally christian nation state, but of the fact that the priests are government officials and the government pays them. So the result is that a majority of the priests are not christian, many of wich are old communists that are in this only for the steady paycheck. Many of them have begun to refering to themselfs not as christians or priests but rather as religious technicians.
This to much connection, due to an agreement made in 1907 between the national evangelical-Lutherian church, that owned around the third of the country in land titles, and the government that transferred this land areas to the state instead of the government pledgin to pay the priests salary and some other exspenses of the church.
This is at least what I beliewe has led to the eventual downfall of christianity in Iceland, and similar things propably in mainland Europe and elsewhere. Other things would be rabid introduction to the outside world and modernity in the last 60 years or so, and vulnerability to outside influences because of how small the nation is.
I hope to God, in wich I beliewe as I am raised in a pentacostal church, will prevent the same development in the USA or elsewhere where Christianity is still strong.
This problem of "watered-down" doctrine is not a new one facing Christianity. It is as old as mankind himself. It seems we (all of mankind) have accepted the statement that there is nothing absolute as being absolutely true, no matter how illogical. I belive that people accept it because it frees them from the possibility of being absolutely wrong. The trade-off (never being absolutely right) is an acceptable price to pay. Therefore, "christianity" and "God" and "church" become nothing more than words with whatever meaning the speaker wishes to ascribe to them. And, man being what he is, seems most adept at polluting them, rather than imbuing them with more substaintial meaning than they had when they were defined by the doctrine. IMHO