Atheists in Massachusetts are challenging the Pledge of Allegiance. I certainly think mention of God in a national standard oath is problematic Constitutionally.
However, there is a bigger problem with the Pledge that no one, even many libertarians, seem to mention: It is abhorrent for our government to be requiring its citizens to take a loyalty oath. This is particularly true in that the requirement typically falls on minors who don't have the experience and cognitive ability to parse what they are pledging (there is a reason we don't allow minors to sign legal papers).
There is nothing in our original model of government that requires that citizens be loyal to the country or to its government. We must observe the rule of law and respect the rights of others, but at some level what does "allegiance" even mean? I said above that kids can't understand what they are promising to do, but I don't even understand. When I say those words, what commitment am I making, exactly?
Historically, the requiring of citizen loyalty oaths has certainly not been a marker of a free society. In general, the more totalitarian the society, the more emphasis is placed on allegiance pledging. It could be worse -- the most abusive of regimes generally require loyalty oaths directly to the ruler, rather than to the nation itself. We have not gotten there yet, though some morons seem to be begging for just this sort of personality-cult totalitarianism.