Well, let's look at that phrase. Congress shall make no law respecting the establishment of religion, or prohibiting the free exercise thereof; etc.
Now, let's parse, shall we? Congress shall make no law...This pertained to the U.S. House and Senate, not state legislatures, not town councils, not school boards. Is saying the pledge in California a U.S. law or a local one? I believe it is local.
Next, respecting the establishment of religion. This means there will be no national church, such as the Church of England. It did not refer to individual states or towns. A state could have had it's own church and taxed everyone for its upkeep.
Last section, or prohibit the free exercise thereof;. This says that Congress doesn't have the right to tell people they can't read a bible in public, or pray at a football game. It says mind your business, you power hungry little creeps in Congress.
The whole problem has come up because the Supremes feel it is their job to expand the role of government into every facet of people's lives, and we let them.
If we were to truly follow the Constitution, There would be public schools whose flavor would tend mostly Christian, although many different denominations would be represented, a few Jewish, and a couple less Moslem. There would be others who would vote for no religious references, but it would be done at the district level and not the national.
Ammendment XIV. Section. 1. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
Note also that the First Ammendment is not granting or creating a right to free speech or freedom of religion, but simply recognizing those rights as the inalienable rights that any and all individuals have against any government whatsoever, including that of States, counties, cities and towns.