If it was a question purely of the ethical issue as the tone of the original post you can't really put cost into the equation as a balancing factor.
As far I knew Badcompany was talking about banning religious education overall, this obviously includes the removal of the link between religion and the state school system.
I feel that both would be detrimental. One, children need to learn about religion, like it or not it plays a huge part in human society and interaction, not teaching them will increase prejudice and misunderstanding between often disparate religious and cultural groups. We should have a more ecumenical system (although you touched on this below) as many Christian Schools currently do, where they teach, not only the religion to which they are connected, but a range of others as well.
Secondly, I think that the infrastructure and funding given by the religious institutions is not easily replaced and its removal would be detrimental to our children's education.
Regulation is the key and ensuring a broad education in all things, including religion and beliefs, especially those not shared by the child's families.
Having said that, I see no barrier to removing the link if said funding and infrastructure was replaced and that RE is broad in scope across multiple religions and philospophies and the broad ethos of our schools is culturally appropiate.
Something I'd overlooked when I replied to his post tho is that not all faith schools and increasingly less in Christian backed schools (no idea on other religions) push their religion onto their students.
The latter is very true, increasingly state faith schools, particularly those of CofE or Catholic ethos do not limit RE to their specific religion. The Catholic school my son attended teaches a range of religions and philosophies including Atheism. It does however retain a Catholic ethos, which is frankly a general 'be nice, respect, love each other' liberal ideal of behaviour. You can also request that your child is excused from religious education and assemblies if you want.
The problem comes in unregulated religious schools, such as Islamic Madrassas and some Jewish institutions...
Technically faith schools form almost all state funded schools in England, due to the requirement to teach RE under the national curriculum, as yet, and correct me if there is one I am unaware of, there are no truly secular schools in England.