Separation of church and state was stated to prevent congress from enacting law which would prevent or otherwise curtail the freedom of people practicing religion; it was not a statement which would prevent religion from being practiced in such things as school, or any other government-backed organization.
Most people think that separation of church and state is a hard piece of legislation, which it is not. To think that decisions made within state are made without religious bias is naive and those who seek firm separation really don't understand the implications of that. Imagine that any place you go, which was subsidized by governement funds, would adhere to this clear separation, and anything it deems as religion...even the absense of religion as being a religion. Well, then everything would collapse - we would have a state which criminalized such behavior since we all rely on the state (roads, voting, police, fire-fighers, libraries, etc). Usually this separation is just a mechanism for people to identify differences and try and make other people compromise their freedom.