I regard theocracy as the only truly coherent (and best) form of government - by which I mean that all the various officially-approved aspects of national life ought (ideally) to be unified by the religion.
But Christianity is an opt-in kind of religion - and belief cannot be coerced - so in practice there are always a sizable proportion of the population who will not or cannot or are not eligible to opt-into any specific Christian church. So how should a theocracy treat them, given that all public affairs will be run in accordance with the ruling religion?
This thought-experiment can be examined using a wealth of historical experience - and I think the best solution is that the ruling Christian church (or denomination) ought to regard themselves as an elite and privileged group; but not as a universal church - because even when theoretically the church is open to 'anyone' in practice there will always be (and there must always be provision for) those who for various reasons cannot or do not want to join that church - or whom the ruling church will not have as members (perhaps because they fail to reach minimal standards of observance or obedience).
No matter how minimal is the compliance required by the ruling church - there must be rules, and these rules must be enforced - so there will always be those who do not wish to opt-in, or who are excluded.
Clearly, there must be some arrangement by which the ruling church is maintained and not allowed to be subverted or corrupted - so there is no possibility of treating all religions (and no religion) equally - and indeed this has never happened anywhere (except where religion is abolished, in which situation some secular ideology - typically Communism - has replaced religion; and religious people are treated as the non-compliers).
Too many Christian theocracies have treated non-church members with an appalling (and un-Christian) harshness based on hatred rather than love. These were, I think, those churches which implicitly (and usually explicitly) regarded themselves as universal; and therefore anyone who did not join them was assumed to be hostile, evilly motivated - and therefore deserving of harsh suppression.
This was applied even to 'heresies' so microscopic and (in practice, as history showed) theologically-insignificant, that even thoughtful and informed people of that era could not understand the difference between the labelled and persecuted heresy and approved orthodoxy - as with the supposed Monophysite heresy of the Fifth century, which was persecuted by the Christian Byzantine Empire with such unrelenting viciousness that the Oriental Orthodox welcomed the advent of a particular type of non-Christian monotheism as a blessed relief. There are many analogous and equally appalling examples from Christian history - Western and Eastern Catholic, Protestant and Anglican.
So what is the answer?
That denominations should regard themselves as in-practice an elite rather than realistically-universal. The ruling denomination can then be strong in its demands on believers; without being vicious towards non-aggressive unbelievers.
I emphasize non-aggressive - no nation can for long tolerate deliberate, organized subversion of its ruling order without opening the door to collapse. Non-believers must therefore submit to the ruling order - and must refrain from intervention to subvert or attack the ruling order in the public sphere - including refraining from generalized evangelism outwith their own group.
But it follows that non-believers must, in practice be treated as in some significant respects second class citizens - because the positions of leadership and authority must (as a matter of basic order and cohesion) be reserved for those in good standing with the ruling church.
Conversely, those who do not or cannot join the ruling church must accept that they are indeed second class citizens, who will inevitably (at least under normal circumstances) be excluded from power; as the price of not being persecuted for their discordant beliefs and their freedom from established church authority.
An example of what I am talking about was the theocratic Mormon state under Brigham Young (which I regard as having been potentially-sustainable - although in practice suppressed by the USA).
Of course, this situation is not optimal for everybody - because being a second class citizen excluded from significant privileges is not ideal for those people. On the other hand, being a constrained and second class citizen it is better than being coerced into conformity with the sanction of unbridled persecution for refusing - which has been the usual situation for most societies for most of history; and remains so.
(Ask the Copts of Egypt, or the millions of other Christians in the Middle East who have, in the past couple of decades, gone from being second class citizens able to practice their religion under constraints for more than 1000 years; to almost-all being forcibly converted, perpetually tormented and tortured, dead or expelled.)
A religious/ ideological free-for-all is not sustainable - so need not be considered as realistic.
One implication of this is that - in my opinion - Christian denominations should in practice (even when not in theory) regard themselves as an elite of the most devout of the potentially-saved, rather than themselves as the only path to salvation and everyone else as actively evil hence necessarily-damned.