The main point is not the legal principle of the act, but rather one's ability not to care. If you're not Christian and you see a little nativity scene in front of the fire house as you're driving through on your way to a "Holiday" bash in a larger city, don't call the ACLU. While you might be right in the general principle of government impartiality towards religion, the fact that you're getting to make a huge ruckus about something like that and let it distract you from drinking bourbon mixed with egg nog while your friends sing holiday songs around the fire wearing awful sweaters is more an indictment of your character than that of the head of the fire precinct.
While I think you have a good point, such occurrences do erode solidarity. I for example would be more likely to identify as a foreigner in my own community and start to think more in terms of "I live in a town of, by, and for people who value Christians more than non-Christians." That is ultimately harmful to social cohesion. It undermines ones willingness to be loyal or patriotic, given the perception of being somewhat betrayed by government if not the public in general for often responding to criticisms of things like nativity scenes funded by and/or placed on premises of the government in vitriolic ways.
On the other hand, this easily cuts the other way as well when people like me try to promote ways of communicating that seem more righteous. There is a struggle underway for influence over the social mores people tend to conform with. A person with beliefs like mine won't really be happy until society gets reshaped in a way that, as an unintentional side-effect, would be very unsatisfactory to most people who want to settle for current or more traditional ways of life. The fact that so many people are concerned that "political correctness" may be going too far at least in part reflects the reality that old ways are succumbing to others. Not all of these changes are positive of course, and there are instances where I think people have really gone "too far," but as with many matters the judgements we make are so very subjective in quality.
. . . Every large corporation or government entity I've ever worked at has controlled language in the work place for various reasons that most of the time have nothing to do with "political correctness."
To expand on that line of thought, large corporations tend to be led in an authoritarian fashion and have illiberal cultures on account of their fixation on profit. Government entities meanwhile cannot tend to their assigned tasks without funding, and anything that could call that funding into question or threaten career- or legacy-focused leaders could easily provide motive to control the conduct of their workers. In a lot of ways we are routinely pressured to set aside our rights in exchange for opportunities to have work, enjoy forms of leisure, and - more fundamentally - survive.
