What is a multifaith theocracy? I can see a multifaith city (that is, with several different religions active in it) and I can see a polytheistic theocracy (that is, ruled by the priestly caste of a polytheistic religion). But it's hard to imagine a theocracy (rule by priests / divine agents) that is multifaith (consisting of multiple different religions). What would keep it this way? Why would people want clergy of different faiths in the ruling caste, but not non-clergy people?
If you want the religious institutions to be rather good and at the same time have a horror setting, you need the churches to oppose something horrible. Something dangerous enough that it forces people into making painful and dramatic choices. If the churches are the main line of defense, it also creates a good reason for them to be in power.
Let's say there are demons who plant spiritual seeds in people. A seed grows, gradually take over the body and then turn it into a monster, from inside out. You never know if the person you meet is normal, possessed or on verge of erupting into a bloodthirsty beast.
Priest do what they can to stop it. They set strict codes of ritual purity, aiming to minimize risk of infection. "Never look anybody directly in the eyes", "Wear nothing made of animal skin or bone", "Have no male touch a baby for a week after it was born" and so on. It's not perfect, but it helps. And is someone breaks a rule, they are ostracized, banished or even killed outright. It's not good, but it's necessary.
Now you can put your players between a rock and a hard place. Will they fight the demons, even if it means killing children and turning away from friends? Will they see the churches as the only chance, or as murderous fanatics no better than the demons? What will they sacrifice to the gods to gain a sliver of their power? What will they do if they suspect they themselves could be infected?