I believe the original intent of the 1st Amendment was to avoid the exact situation we now see where it's okay to display religious materials in public in some states, but not others.
Well you are dead wrong, again. Maryland was Catholic, Pennsylvania was Quaker, New England was largely Anglican, and Virginia was Protestant. People preferred it that way as a matter of free association, the ability to constitute a community reflecting common values and beliefs, a freedom which you would clearly repress.
Until the rulings of the Warren Court, citing the Orwellian concept of "selective incorporation" pursuant to the 14th Amendment, it was entirely permissable under the Constitution for a State to have an official religion. The several States which ratified that document, each with their dominant and disparate religions, would have had it no other way, which is why they restricted specifically the Congress in the First Amendment.