"If one is to understand relationships between church and state after the granting of freedom of religion by Constantine, it is necessary to give some attention to the political problems that the emperor faced at this time." (Cairns 123)
Around 31 B.C., Augustus established an empire in place is an anarchy wrought by Antony. In this, the emperor shared power with the senate, but barbarians started to attack and citizens started to rebel, and between 192 to 284, another revolution happened.
Diocletian decided to turn the empire into a dictatorship to secure the Greco-Roman culture. This meant that Christians had to be persecuted again as they threatened that culture. Finally, Constantine came to power and realized that they could not wipe out Christianity. He decided to incorporate it into the culture.
When he was in battle, he saw a cross in the sky and words, "in this sign conquer". Constantine decided to fight alongside the Christians and not against them. He won that battle.
In 313, he made the Edict of Milan, granting freedom of worship to all people. Constantine and his sons were pagans their whole lives, and many of them still favored heresies over true Christianity. Many Mennonites consider the Edict of Milan to be the worst day in Christian history. In that day, people started joining the Church because it was cool. Before then, people stayed in the Church and faced persecution because they truly believed. This is when the Church started to become watered down and accepting of pseudo-gospels such as Arianism and syncretized Gnosticism.
I do think the legalization of Christianity did start a long process of over-contextualization that went to far and had to be corrected in the 16th century. But I also see 313 as the start of Christ's millennium. Christians could grow and learn and establish empires and thrive happily. That interpretation of the millennium makes the most sense to me because the Church really did thrive, it had political clout, and it was truly a universal Catholic Church. God kept Satan off of us for a good long time so that we could enjoy an earthly kingdom that loved Jesus. It was when the Reformation happened that the millennium ended. It's hard to have a Church empire when the Church is broken up. Although I'm on the Luther side of the Reformation whole-heartedly, I do think that is another tragedy in the life of Christendom. It was needed because the Church had lost the sense of looking only to Christ for salvation and life and looking to deceased people and Mary and their own penance. The truth needed to resurface. But the good thing, is despite the fractured state of the Church today, there is still only one Church united by those who truly serve Christ and care for each other.