There can be nothing wrong with educating children about religion. And I say this as an agnostic. But religious education must include information about all the world’s main religions, and about atheism as well. And it also shouldn’t avoid mentioning some of the problems caused by religion. Children benefit from seeing all sides of the coin.
Even public schools, i.e. schools instituted, organized and funded by the government, should provide this kind of religious education. Banning religion from public schools is wrong, but not because it would be a limitation on the freedom of speech of religions, as some religious activists claim. It’s not because you’re not allowed to speak in a certain place that you’re not allowed to speak (freedom of speech does not include the right to say anything anywhere; if it would, then newspapers would be forced to print everything everyone asks them to print). Such a ban is wrong for another reason: it would be stupid and a disservice to children.
It would be politically and legally wrong to have public schools teach only one religion, or emphasize one religion. The separation of church and state does not allow agencies of the state – such as public schools – to be hijacked by a particular religion, even if it is the religion of the majority of citizens (I would even say, especially when it is).
If this were allowed, then a religion could then use its privileged position to compete unfairly with other religions, and the result would be the abolition of religious freedom. The choice of religion would then no longer be a free one. Children would be led to one religion. Rather than complete information on all religious options, necessary to make an educated choice between religions, children would have a one-sided view on religion.
For the benefit of their students, private schools are of course also advised to teach all religions. But since many of these private schools are religious schools, it is only fair to allow them to focus on their own religion. It would indeed be an unjustified encroachment on religious freedom if religions and churches were not allowed to organize their own system of education according to their own rules (even if it includes teaching that Darwin was wrong and that Dinosaurs and men walked the surface of the earth together – but evidently they wouldn’t do their pupils any favors).
As long as parents have a choice to send their children to such a religious school or to another, public school, then there is no problem. But this must be a real choice of course. If the public schools are of inferior quality, or difficult to reach, then there isn’t really a choice.
School prayer is quite another matter. Praying is not learning, and the demand of inclusiveness mentioned above does not appear to work in the case of prayer. Starting lessons with different prayers of different religions seems awkward. Hence, school prayer in public schools looks like the kind of hijack that is contrary to the separation of state and church.