Public Schools, Private Schools, and Moral Capital

I've just finished reading Amy Gutmann's Democratic Education, and while I find myself resisting several of the book's assertions, I've had trouble articulating a response to one of the passages.  Here it is:

Many public schools in the mind-nineteenth century were, to say the least, disrespectful of Catholicism.  Catholic children who attended these schools were often humiliated, sometimes whipped for refusing to read the King James version of the Bible.  Imagine that instead of becoming more respectful, public schools had been abolished, and states had subsidized parents to send their children to the private school of their choice.  Protestant parents would have sent their children to Protestant schools, Catholic parents to Catholic schools.  The Protestant majority would have continued to educate their children to be disrespectful if not intolerant of Catholics.  The religious prejudices of Protestant parents would have been visited on their children, and the social, economic, and political effects of those prejudices would have persisted, probably with considerably less public protest, to this very day.  There may be little reason today for Catholic parents to worry that privatizing schools will reinstitutionalize bigotry against Catholics, at least in the short run.  But one reason that Catholics need not worry is that [a school system built on parental choice] today would be built on the moral capital created over almost a century by a public school system.

My questions for Rick, Tom, Patrick, Michael S., and others who have written or thought about the importance of Catholic schooling and/or school choice: Do you agree that, as public schools became more tolerant of minority views, they played an essential role in reducing tension and increasing understanding between Catholics and Protestants?  If so, would you still advocate for school choice if you were writing in the nineteenth century, or is your support for school choice premised, at least in part, on the availability of the "moral capital" created by public schooling?

Rob