In my opinion I believe the Catholic Church can still exist and be more progressive. All that needs to be done is separation of church and state, strip of their right to own property beyond church-related structures, alter the theology to match Protestant values of simplicity and loving your neighbor....
That's honestly what I got. What about your opinions?
I think you have a dramatic misunderstanding of the Catholic church's beliefs and principles. Growing up in America as a Protestant I had them myself for a long, long time. But such...misunderstandings are woven into the fabric of the Anglosphere, which has been slandering the church since Henry VIII had his little mid-life crisis, er...founded the church of England.
The fact is the Church has been talking about and emphasising the role of social justice since the very beginning. For most of European history, in fact, it was the only group talking about concern for the poor and peace. Catholic priests were the first to speak out against slavery and the exploitation of the natives in the New World. And the list goes on. The problem was, when it became powerful, the Church also became political because it started looking out for its own interests.
This is the way all religions go. Prophets are reformers, religions are political beasts. The bigger and more successful they are, the more conservative the religions become, in the main.
As for Protestant theology valuing simplicity and loving your neighbour -
Firstly, it doesn't. The five solas are the foundation of Protestant theology. And one, Sola fide, means that you needn't even bother with good works. Now most Protestants will say that you should do them anyway (and most decent ones will), but there's a psychological difference between must and should. The Catholic church teaches that works are a sign of faith. If you're not doing good works then your faith is lacking. Works aren't a definitive sign of faith but lack of works definitely reflects a lack of faith. And it is in fact (a minority of) Protestant denominations that teach something called the Prosperity Gospel, which says that riches on earth are a sign of favour in heaven and is, quite literally, the most unchristian thing I've heard in my life.
The fact is, you find the same dynamic in Protestant churches as in the Catholic. Small churches will be more about Jesus teachings, but larger ones? Not so much. I mean, how many Protestant leaders spoke out against the Iraq war the way JPII and Benedict did?
From creationism and the rest of anti-science, to homophobia, to anti-immigrant xenophobia I think you'll find it's large evangelical denominations which are the foundation of almost all the Conservative Christian energy of the day. And I wouldn't want to see the Catholic church in any way conform to this.
Disestablishment is a great idea though, fully in favour of that. Not sure about stripping the church of the right to own property outside of church buildings. The Catholic church is the largest non governmental provider of health care in the world, so it does need revenue for its works and its already in a lot of debt - has been for a while now.