I believe that if there was to be a theocracy of some sort, it would only work on the parish level. The parishes would still report to Rome for spiritual authority, but otherwise each parish is their own micro-community that more or less manages on their own. And the priest wouldn’t really be “in charge”, lay people would handle the politics side of things while referring to the priest or bishops for spiritual/ethical direction. And even THEN it shouldn’t be a forced community, as in people are free to leave and come as they wish.
I feel that way about government in general, religious OR secular (in terms of organization).