The Roman Empire was not really a theocracy you know. True, they did have a state religion, but then, so does Great Britain to this day.
That makes it a theocracy. It doesn't have to be Iran to be a theocratic state you know. But oh well, nobody would want to admit that Britain has anything in common with a fundie country. ; p
The state religion was something that most people gave public reverence to,
Just as people were complaining earlier that you weren't considered a "true citizen" by some vocal leaders if you weren't a theist in America, in Rome, if you weren't a pagan, you weren't a true citizen either. Jews had their own seperate communities, and Jews that "sold out" weren't liked very well by either side (except for corrupt dignitaries like King Herod, who was seen as a Roman puppet anyway). Christians were seen as whacky cult members, and they had the same blood libel rumors applied to them that were later applied to Jews and witches in later centuries (they eat babies, they drink blood, they have sex orgies in secret, plot against the public order, etc). They were called "atheists" because they rejected the civic religion's gods (which is nigh near treason). The Jews got something of a break since they were seen as a long established tradition and they had been too stuborn to adopt Roman ways (though some did, and again, they were looked down on by their fellow Jews who had refused to conform).
but there was a high degree of tolerance for various faiths throughout the Empire
Much in the way that China does. As long as you don't attempt to resist the public order and acknowledge the sovereignty of the state, you're okay. If you protest or disagree or resist... heh
until Constantine turned the whole Empire toward Christianity.
After his death of course. Prior to his death-bed conversion, he was still the head of the Pagan system, though he patronized the Christian church (which was unusual). Once the Empire became officially Christian, I believe only one major Emperor tried to bring back the pagan system (but that effort was abandoned).
Basically, as long as you were willing to acknowledge the authority (semi-divine) of the Emperor, the Romans really didn't give a damn what you worshipped.
Yeah, pretty much. Prejudice existed, but perhaps it was similar to what hated minorities are viewed in our so called civilized cultures, maybe less so. While most Jews and Christians would refuse to acknowledge a man who called himself God (or the son of God) (other than Jesus for the Christians of course), there were writings that supported the social order or at least appeared to (note Jesus's comments about "giving unto Caesar" and Paul's telling a run-away slave to go home to his master.
This is a far cry from a theocracy as we define it - a government by a priest caste,
Dictionary.com doesn't list a priest caste (Iran doesn't have Shiite priests that I know of, but I could be mistaken). It only says a government subject to or informed by religious authority. So any nation with an official state church could be considered a theocracy. So Germany, Britain, and other nations such as these would qualify.
who rule according to religious law, with no separation in public life between religious and secular matters.
Just how much power the religious group appears to have doesn't really matter, the fact that it is institutionalized in the state and that the laws are based (however loosely) on religious rules puts them squarely in the theocratic camp.
I would suggest looking at theocracies as a spectrum (much like republics) from mild religious control to full fledged clergy lead countries where only one religion is legal (like the Taliban government).
Now the Byzantine Empire fits the definition of a theocracy much better, since the Emperor was held to be Christ's appointed vicar on earth, had the power to appoint the patriarch of the Orthodox Church,
Of course in the middle ages many, if not all kings ruled by "divine right" or were minor gods themselves (like Egypt and Rome) and having an official religion was not uncommon.
Muslim states usually had a deal wherein if you were a Christian or a Jew, you weren't a true citizen, but if you paid a special tax, you could enjoy certain rights and protection, and sometimes this also applied to monotheists of other faiths, but rarely to pagans. Of course the idea was, you got an incentive to convert to Islam. But this is still a theocracy.. the state religion is Islam, and the majority of the population and the leaders belong to this faith.
Now consider Great Britain.. the official religion is Christianity (the Church of England) which is institutionalized in the state. The head of the Church is the King (or Queen) of England, and just below them the Archbishop of Canterbury. Now being a member of another religion (or no religion) isn't illegal, and at least half or more of the population doesn't practice Anglicanism (or Episcopalian as its called over here) but that doesn't change the fact that its established. And last time I checked, these spiritual leaders weren't chosen by the people (and yes, I know that the Monarch is a figurehead, etc. but why have them at all if this isn't a theocracy?).
You couldn't do this in the US without changing first constitutional amendments (anathema to most people). This is not fundamentalism, but it is theocracy. God save the Queen, eh? ; )