The religious nature of the display isn't really the issue. Sea-Tacs contension that the Holiday Trees aren't religious whereas a Menorah is wouldn't have held up. The real problem they would have faced in court was barring the Menorah while allowing the trees, which have a religious component regardless of what Sea-Tac says. That's borne out by the outrage by Christians on this site over the removal of non-religious Holiday Trees.
BTW, a Creche is OK in public displays and is making a comeback, partially due to the inclusion of Menorahs. It all depends on the nature, and inclusiveness, of the displays. Note the link in post 145.
Yes it would as you know.