I've not been keeping up with Ms. O'Donnel's campaign, but that read to me like she was challenging including the "wall of separation" as part of the First Ammendment.
I'm rusty here, but didn't the whole idea of a "Wall of Seperation betwen Church and State" come from one of Jefferson's later writings? (notes). By my reading the 1st Ammendment precludes establishing a state religion, and precludes telling folks they can't practice a particular religion. That's it. The whole idea that if someone in the government mentions God it's unconstitional came later.
Now, it's possible that she failed to communicate that well, or the news editing was less then flattering, or maybe she's just a moron. Dunno. But she's right the phrase "Seperation of church and state" isin't in the B.O.R. Unless you read it in.