Which is correct. There is no Establishment Clause problem with a government entity putting up lights and wishing people a generic "Happy Holidays".
But then he says:
This conflates two issues: Semi-public forums for Free Speech purposes and the Establishment Clause. The Washington State case involves the state opening up a space for speech by private actors. Once it does that, it must not discriminate on the basis of viewpoint. So, if it takes religious messages, then it must take messages from all religions (or those who oppose religion). That's different from the government speaking. In the case of private speech on public property, "nativity scenes and crosses" are fine, iff all other religious displays are permitted, too. Olympia just found out what it means to do that.
Update: Ah, he was making a normative claim that government shouldn't open up limited public fora for religious expression. I tend to agree. Either you get sheepish conformity (with the attendant risk that people begin to think Religion X is the State Religion) or you get uproar. If there were different displays with a whole lot of mutual respect and tolerance of diverse opinions - then it wouldn't be religion, now would it?