I like the idea of AC affecting happiness. I can imagine that even in the most Ordered of Elohim citadels, things would just feel
wrong. Everyone's tempers would be shortened, the days would grow darker, et cetera. A happiness modifier (bonus for AV, loss for others) would be appropriate to represent this; people get crabby if they reckon tomorrow could be their final day and there is nothing they can do about it. Unless they believe that the Apocalypse will bring them demonic rewards, of course.
It seems perfectly appropriate that the world start to divide on idealogical grounds. A good leader who might, in less dire times, be all for allying with an evil neighbor for the good of his people might not think as clearly when demons whisper in his dreams. Instead, he'll attack even his neutral neighbors for perceived complacency, never mind what happens to those who are evil. Whether they're benefiting from, ignoring, or actively fighting the forces of Hell might not be taken into consideration. It seems fitting, then, that the world would start to line up on idealogical points, and that those who seek to remain neutral or serve an evil other then Hell would have to:
a. Choose a side and act the part. Adopt the Order and stop kicking puppies, or embrace the power of Hell and start offering puppies as blood sacrifices. When it's about Heaven and Hell, you can't have the in-between people who only kick puppies but aren't willing to go all the way.
b. Create an army and/or alliance to challenge Heaven and Hell alike. (I can see Cassiel at the center of such an alliance...) After all, people can't force you to take sides if you're the biggest, baddest, guy around.
Oh, and I also love the barbarian-alliance ritual idea.