I think everyone here has raised some very good points. Yes, there are times in history where a fusion of different cultures and religion did not work out well; whereas other times it did. It does indeed depend on the government type, historical situation, popular attitudes and prejudices, etc. The question is now: How to implement that in a Civ game?
One idea that I have that I think might work (and which I will include in a larger thread about expansion pack ideas) is the concept of having official "Enemy Relgions" and Enemy Civics just like you have official state relgions and state civics. That would re-create scenarios where you could have a "Jerusalem-like" conflict.
What I think is missing from the Civ games is the option to DISlike certain religions or civics, that you deem dangerous, "unholy", ideologically at odds with or whatever the case may be. The situation right now is that you pick a certain religion and dislike all equally whereas in the real world we know that is not the case; some religions and some civics are more compatible than others. This idea would implement that.When you declare a religion or civic to be an official Enemy Religion it would automatically increase the animosity between you and the state(s) that have that religion. Those states will be far less likely to negotiate with you, and trade with those civs will be nearly impossible. On the other hand, you now have the option to forcibly "cleanse" out the population of your cities that have the rival religion, though this may result in a loss of population. It also enables "Holy Alliances" with other civs that have the same state religion and enemy religion that you do. Perhaps a Crusader or if you want to use a more generic term, "Religious Warrior" would be created automatically every 5 turns from such an alliance.
If you go to war with an "enemy" civ and you conquer one of their cities, you will have the option of forcibly converting that city to your relgion and eliminating their religion, though since not all will consent to being converted this will result again in a major loss of population. On the "positive" side, it will be much easier to put down revolts in those cities since the people left alive will be so scared of getting killed themselves. Once peace is declared however, and people feel more secure, lingering resentment may increase. If war is re-declared however, those same people will be less likely to show overt signs of unhappiness since they remember all too well what happened last time. This way, you could re-create a scenario where a theocracy attempts to impose its own religion on the rest of the world and eliminate all others.