Having a nativity scene on public property is a government endorsement of Christianity.
This is the problem: People want to act like allowing someone to set up a display constitutes an endorsement of the beliefs of the people who set it up.
Allowing someone to set up a sign or symbol doesn't mean you're endorsing anything - it just means you let them set it up. Otherwise you can't allow anyone to set up anything, ever, for fear someone may interpret it as a government endorsement for anything remotely related to what is going on.
Bottom line, the government isn't endorsing anything simply by allowing it to use public land to do something. As long as all groups are granted equal access to use the land, there should be no problem.
The courts are just following the Constitution.
No, they're not. That's the problem.
The constitution says the government shall not establish a religion - it does NOT say it will ban any and all religion from public property, and it was certainly never intended to imply any such thing (see my previous post about the founding fathers intentions).
Allowing someone to, say, put up a nativity scene does not establish any government religion, and should therefore cause no problem - unless you get some radical atheists with a ridiculous agenda trying to make an issue out of nothing because all they know how to do is cause trouble.
That's another thing - many religions are known to do a lot of great things in the world to help people, yet the atheists do nothing but cause problems. I've certainly never heard of a group of atheists getting together and doing charitable work on behalf of atheism, but they sure will waste time making sure they'll raise any remote possibility they might have a legal claim against religions.
You are just not allowed to force everyone else to participate, which is what happens when you put a nativity scene up on public property.
That doesn't force anyone to do anything. You don't have to change religions because you see a nativity display on public property. That idea is absolutely absurd.