One of the great ironies of church-state debates is that those who oppose public funding of religious activities always seem to take religion more seriously than do religious lobbyists themselves. In your account, public vouchers for Catholic or Baptist or Jewish schools are simply funding "education," not religion. Pay no attention to those crucifixes over the blackboard, those prayer services, those creationism classes, those Talmud readings, those catechism questions! I would start from the opposite view: Religious education is deeply religious to its core, as it has every right to be under the free exercise clause. And that's what makes public funding of religious education an establishment.
You concede that a National Endowment for Prayer would be unconstitutional, suggesting this is because it "would subsidize an activity that is religious, and only religious." But surely the test for an establishment cannot be whether an activity is "solely religious." Under that approach, government could engage in the unlimited funding of religious activity so long as it threw a few secular fig leaves over it: voilà , the National Endowment for Meditation, Stress Management, and Prayer! But the problem with this picture is with the government awarding grants to prayer at all--not what share prayer would get of the budget.
You suggest that paying for religious education with public dollars is as innocuous as including a Bach Mass among the choral programs funded by the National Endowment for the Arts. But the two are not the same at all. Religious representations in art or music may be appreciated for their historical or aesthetic value without enlisting their viewers or listeners into practices of faith. Even such an unreconstructed separationist as your old boss Justice Brennan did not think that all the Renaissance Madonnas had to be stripped off the walls of the National Gallery. But a child being led by a teacher in prayer or graded on a homework assignment about God's commands is hardly in a position to treat religious content with the same detachment.
Moreover, publicly funded education is a form of government speech. No one thinks that they are hearing the voice of the government when the Peoria choir launches into a Kyrie eleison in a concert funded partially by the NEA. But when teachers paid out of the public budget stand up in front of their classrooms and preach religion along with their government-accredited curriculum, there can be little doubt that they are acting as agents of the state. Public dollars convert parochial teachers into government mouthpieces, and if the establishment clause bars anything, surely it bars an official bureaucracy for religious proselytization.
Our disagreement may center on our different readings of the establishment clause. I read it to mean it bars government from favoring religion. You would rewrite it to say that "the government should neither favor nor disfavor religion." Indeed you come close to suggesting that inclusion of religious schools in voucher programs is not only constitutionally permissible but is even constitutionally compelled. I do not know where in the establishment clause you find such a remarkable anti-discrimination proviso. The framers of the First Amendment, descended from settlers who fled religious persecution, of course intended that government should not disfavor any religion in relation to other religions. But it hardly follows that government may never disfavor religion in relation to secular programs. To the contrary, the establishment clause necessarily requires that government "disfavor" religion in relation to secular programs; it may "establish" the ideologies of capitalism, libertarianism, or social democracy but not those of Presbyterianism or Islam.
In short, the establishment clause is not a civil rights act for religion, barring anything that can be characterized as "discrimination" between religious and secular activities. If it were, you would not be among the most prominent advocates of a new constitutional amendment proposal that would guarantee "equal access" for religion to all government programs. Unless and until such an amendment were unwisely enacted, public funding of religious education should be found unconstitutional.