I think that there’s a great tension between two issues, both of which are berumo shel olam. On the one hand, as long as the state identifies itself as Jewish, it is a massive, heretofore unparaleled chilul Hashem, that a Jewish country is not run according to Halacha, which means that there are two options: enforce Halacha on a national level, which rabbi yoshe ber soloveitchik predicated his support for the state thereon, or let the state cease to be called Jewish, and just become a nation of its citizens, with equal rights, etc…like America.
If it were to become halachik, the enforcement will incur protests and frum jews might be killed by secularists. That doesnt mean necessarily that it shouldnt be done, but it is an important factor.
We might not be obligated in restricting the sinfulness of others as we are today, but as long as a “Jewish” state purports to exist, it would be so obligated.
In the second option, the fallout is that frei jews in israel will lose the small amount of kiyum hamitzvos that the state facilitates; the rabbanut would be basically dissolved, kashrus would disappear, shabbos would be like sunday, government might not be able to fund yeshivos, too.
Gerus would be like it is in america; autonomous rabbinic organizations and batei din who work together with shared standards, but not state-run.
I’m not sure which is better.