Ah yes, the ole Hitchens cop out. Its religion when I don't like it and not religion when I like it. To re-imagine an anti-theist dictatorship that viciously suppressed organized religion as a theocracy takes some serious mental gymnastics. At that point you're stretching the definition of theocracy to the point of absurdity. I guess Nazism and Revolutionary France were theocracies as well then? The British and Mongol Empires too?
Why would the Sultanate be such a bad idea? Look at the most successful countries in the region, they're mostly monarchies. Much better than having a dozen different republics that engage in military dick measuring contests. Heck even in Europe the nation state system lead to brutal wars.
I think
@Yehudim's point is that having a decentralized monarchical system with regional//local autonomy would better accommodate the ethno-linguistic diversity of the region than a bunch of different nation states that try to homogenize and end up persecuting their own minorities and/or fighting each other.