Religious exemptions and undue preference for religion

[Volokh, Eugene]

Cornerstone Christian Schools v. University Interscholastic League,
http://www.ca5.uscourts.gov/opinions/pub/08/08-50429-CV0.wpd.pdf,
rejects Cornerstone's (and some Cornerstone parents') demands to allow
Cornerstone to participate in a public-schools-only sports league.  The
Free Exercise Clause analysis sounds quite right to me under Smith, but
I was particularly struck by this footnote (14):

"We are also reluctant to grant the relief plaintiffs seek because of
its breadth. Plaintiffs asks us to declare section 12(d)
unconstitutional, thus opening the door to the UIL for all nonpublic
schools. The only other viable alternative under the complaint-granting
an exception to Cornerstone (or perhaps all parochial schools) based on
the theory that the free exercise claims elevate Cornerstone (or all
parochial schools) to a higher status than secular nonpublic
schools-would be equally unacceptable under federal law. See Swanson,
135 F.3d at 701-02 (holding that the Free Exercise Clause does not
require the government to provide "special treatment not accorded other
home-schooled or private-schooled students" in the form of "an added
exception to the part-time attendance policy [which denied home-schooled
students the right to take classes in public schools], that would
accommodate people who home-school for religious reasons")."

Texas has a state RFRA.  Say that Cornerstone, or some similar school,
demands a religious exemption under state RFRA.  Would such an exemption
indeed be unconstitutionally religion-favoring?  (Note that giving
Cornerstone such an exemption that private secular schools don't have
may well lead quite a few families to choose Cornerstone's religious
education over private schools' secular education, if interscholastic
competition is important enough o those families.)  Even if it wouldn't
be unconstitutional, could the state still argue that it has a
compelling interest in preventing such favoritism for religious schools?
Or would the answer be that an exemption should be given, but should be
extended to all private schools, secular as well as religious (on the
theory that this would be a least restrictive means of serving the
interest in preventing favoritism for religious schools)?

Eugene