The arguments you use against the Muslims are the same arguments the PC leftists use against us Christians. I don't like anyone telling me that I can't pray where I want to, so I'd better be cognizant of the fact that what protects Muslims ALSO protects me. If you want a "State Approved Religion", head to China...
"Allah" is actually the Arabic word for "God." Christian Arabs (there are quite a few) also worship "Allah."
"God" is the English word for the same entity. We don't really know which language God himself uses, or whether he uses ANY human languages, but we have to assume that an All-Knowing God understands them all. I imagine He hears prayers regardless of which term is used to address him. I never heard that he had enacted an English only rule.
Incidentally, if this dinner takes place, GWB will not be the first Christian to engage in prayers alongside Muslims. The Pope has done it several times -- both in the Holy Land and in Italy.