So, without actually looking at the article (which would spoil it by making it obvious what was meant, presumably) here's my answer: it's unbearably ambiguous.

Possible readings:

We can (encourage religious engagement in the public square) but [instead we] insist on ((freedom from religious imposition) and ([on] the widest workable range of religious expression)).

We can (encourage religious engagement in the public square) but [still] insist on ((freedom from religious imposition) and (the widest workable range of religious expression)).

We can encourage (religious engagement in the public square but [yet] insist on freedom from religious imposition) and ([we can encourage] the widest workable range of religious expression).

There are probably others. If I had to try to pin this down to a matter of syntax (English isn't really my field) I'd probably say that the sentence needs some commas to define the scope of the conjunctions.

I think Michael's first sentence is probably the best one.

"We can encourage religious engagement in the public square but insist on freedom from religious imposition...." If an individual views (for example) a creche on the courthouse lawn as a religious imposition, and many apparently do, then how can we "encourage religious engagement in the public square" without that person feeling that his freedom from religious imposition has been trampled upon?

Come to think of it, Michael's first sentence lacks internal integrity too. I don't think there's any way to fix this.

He's insisting upon freedom from the widest workable range of religious expression.

If I understand it correctly, it should read "We can encourage religious engagement in the public square and the widest workable range of religious expression, but insist on freedom from religious imposition."

If it's workable, why insist upon freedom from it?

Ask Mr. Newdow what a "workable" range of religious expression is, and get ready to measure it in millimeters.

Let's not over think this. Here's the construction that helps the sentence make sense:

We can encourage religious engagement in the public square while insisting on freedom from religious imposition and on the widest workable range of religious expression.