My other concern with that approach is that you can have followers of the same god (but of different aspects) coming into conflict. For example- would a lawful good god allow his elven and human followers to fight against each other in a race war (justified or otherwise)?
I think herein lies two important things for the world creator (and note that this doesn't have to be exclusively the province of the GM):
1) Myths and History lie
Previous posters have touched on this very well. There should be conflicts in your creation stories, 'cause my grandpa told me different that your lyin' grandpa told you! Leaders have intentionally interpreted holy scripts and visions for their own purposes (out of intrigue or honest belief), and thus deviate from each other. Repeat for twenty generations, and you've got plenty of conflict.
2) How much do your Gods intervene in the world and its view of them?
To briefly (and carefully, I hope) touch on real world religions - there are in many "Faiths of the Book" fundamental interpretations of "the Book". They hold that their God would not allow mistruth to come into the translations/interpretations of "the Book". Now in a fantasy world, if your God is constantly coming down and saying "I didn't mean *that*", then certainly the mortals will be more likely stay on a straight and narrow path. Even then, some might say that the manifestation that your priest saw was actually the Trickster God...
But to be honest, you probably don't want your Gods constantly stepping in. After all, if they step in and solve the problems, then what are the heroes to do? So it's best to set your Gods back a bit, let them take on some misty vagueness and conflict.
This is not to say that a "Gods Walk the Earth" campaign isn't possible, but it will have a very different feel and theme than most fantasy games I've seen/heard-of/read-about.
John