Democracy, as the theocrats would likely be voted out of office.
Not true, as they enjoy popular support in many Middle Eastern countries (see the situation in Egypt where the Muslim Brotherhood would probably win a fair election), hell just look at Iraq. And I could definitely see the Confederacy electing such a government if it won independence.
Nazi Germany and the Soviet Union were both secular dictatorships. A genuine theocratic democracy is just about impossible anyway.
Not really, as the Nazi ideology was based on some pagan belief systems and the Soviet Union was state atheist (as a true "secular" state would be religiously neutral, not favoring or opposing any religion). As for the second sentence, that's not true, as there's plenty of places around the world where the majority would gladly support theocracy.
Theocracy and Democracy are nearly polar opposites. Thus I do not understand how you came up with "theocratic democracy". Seeing as how option goes against logic, I voted for option 1.
It's pretty simple, a country with free elections where the theocrats always win because the majority supports theocracy, aka just about every Muslim country.
Well, I was looking at it from the standpoint of the United States when I made my comment. I agree that other countries would be different, but at least they could be voted out. I think that dictatorship tends to make leaders corrupt and evil, even if they don't start out that way. For that reason, I would always take the democracy, as I trust the masses more than any one all powerful individual, no matter how benevolent at the beginning.