Definitely an interesting notion...if you do plan to try it yourself, I'd love to see how it goes. I have a few ideas on how you could fix the multiple deity worshiping though.
First off, you could have city-states that worship multiple deities that focus on the same aspects. For example, if your civ in question had a deity of Fortresses and a deity of Wars, I would have no doubt that they would be buddy-buddy. Or for a more fun approach, devote a city-state to the balance of two deities of opposite aspects, like a city devoted to the harmony between the God of Birth & Life and the Goddess of Death & Disease. THAT would be pretty cool.
On a different approach, have it so that any worship of any deity other than that city's deity is banished. say, over time, a dwarf feels restless after not praying towards one of his deities. If there's enough of the restless followers, you could build an out-of-the-way secret shrine for them to use, like a cult. However, if a Dwarf that is solely the city's deity's followers finds the shrine, then all of the Blasphemers that were in it at the time must be banished from the city's walls, no exceptions. As for where they go after that, the choice is yours...
Finally, you could have some of the city-states fight against each other. sure, you can't have one dwarf kill another by sword, but Ballista Arrows hurt friend and foe alike. I'm sure there are other methods to go forth, too.