Ken, you raise a lot of subjects as to ME as well as real life medieval life. In terms of religion and religiosity in medieval Europe I think a major point is heterogenity and changes. What it meant to be a Christian changes ad much as did the beliefs of the people whom the religion reached. So many pagan elements were adopted into the new religion and places, practices and dates where adapted. Religion moved from formal recognition (almost nothing short of lip service) to internalisation of Christian culture and values.
In art this is no more apparent than in the development in the appearances of Christ on the cross. In the first, early medieval North European, crucifixes he is shown as a triumphant king on the cross, head held high. Later on in the High Middle Ages emphasis is clearly on him suffering. At the same time the formal religion underwent a change where the Fourth Lateran Council in 1215 formalised the existance of Purgatory and thus affirmed salvation as a much more personal matter. In the same period the Pope continously walked a tight line between either integrating conflicting religious views and movements versus trying to destroy them. But all in all what it meant to be Christian was a very varied thing across Europe.
Thus competing crusading movements in the Baltics did at times kill or subjogate people who had already been baptized, simply because they'd been done so by someone else. Or as was seen with the greatest failure of the Crusades when Constantinople was sacked, the Crusades where really about so many things besides religion alone or a join or die-policy.
All in all it was quite a heterogeneous world - and much less ordered - and in a way large scale prosecution of minorities and enforcement of doctrine only really picked pace with the religious "schisms" and fragmentation in the 16th century, when Christians found out they could suddenly speak of being either a "true" or a "false" Christian (depending on who you were). Only then did it reach genocidal proportions where total eradication of the opposing party was sought.
EDIT: In short I think making it too much about Christian versus Pagan is too simple - as is making it too much about Latin versus Germanic. The Diedne became marginalised for many reasons (and in some sagas maybe they were true enemies of the Order), but I think a decisive point wasnt their practices, religion or beliefs alone, but very much about actual politics: that they shunned any kind of investigation and that they had become too powerful and a strong defacto political unity within the Order. That more than anything made them a target for largescale retaliation. A retaliation facilitated by a time of turmoil as well as by some of the "Us" and "Them's" described earlier (such as Christian/Pagan, Latin/German etc). This in a way mirrors the modus operandi of the established church (as in an organisational structure and not as in lay religiousity/piety). Homogenity was not enforced, but only those local movements that both challenged the roles of ordained priests and/or the pope and simultaniously grew suffeciently a following were marked by the church for destruction (whether Cathar, Bogomil or similar) when peaceful means didnt do the job.