Given the conflicts created when religious practictioners adopt literal interpretation of scripture, how is one to separate the figurative from the literal commands? Lastly, it seems that religion is powerful in part because it reminds us that God operates beyond our understanding of the physical (and literal) world, why are we often compelled to shoe horn God's teachings into earthly, human, and flawed rules of logic?
These are the 2nd and 3rd questions from Sam. The first one is relatively easy to respond to, although books have been written on the topic (see biblical commentary that makes use of form, rhetorical, or other kinds of lit crit). In any event, my answer would be that we are to take what is written as it comes to us. If it is a parable of Jesus, then take it as a parable. If it is a letter addressing the Corinthians (but also written clearly addressing a wider audience of readers) then read it as that. If it is exhortation, take it as exhortation. If it is written as history, read it as history.
Furthermore, again as in my previous response, I'd remind Sam (and Sam, thanks for asking these questions) that in addition to reading Scripture in the form it comes to us, it can also everywhere and always be read as first order discourse. That is, it can be read as the basis for prayer, as personal address. This is not the same as saying it is literal OR figurative. Rather, it is saying that when you read it, you can hear God addressing you personally, and you are called to respond prayerfully and consider what God has spoken to you through the Scripture.
Finally, a good Lutheran response would be to say something like, "We don't read Scripture either literally or figuratively. Rather, we read Scripture because it is the cradle in which Christ is lain. We read Scripture because it preaches Christ. If somebody else reads the Bible in some way so that it preaches something other than Christ (and him crucified) then they are inventing some other Bible... we will stick to Christ, he is the lense through which the Scripture is read as well as the source and norm of why we read it at all."
In response to your last question, I'd reverse the issue on you. Why are you shoehorning God out of the earthly, human, and logical? What is it about the earthly, human, and logical that is distasteful enough that you think God can't be there? Or that it is the wrong way to perceive God, or the wrong place to seek God. Lutherans have tended to have a sub-narrative (not always obvious in Lutheran preaching, but certainly present in Lutheran theology) of the hidden and revealed God. Luther warned people away from the revealed (naked) God, because this is God in God's majesty, and is something we cannot know, and/or because this God is dangerous, can kill us (see Moses' encounters with God, for example). God "in the abstract" is something we should not and need not dwell on, because we already have the revealed (that is preached) God, the God we know in Christ. Jesus Christ was earthly, human, and made appeals (at times) to logic. And Jesus is God earthed, humanized, and logicized (made into words that you can sense and touch). This Jesus Christ is for us the true God incarnate, and continues to be present in an earthly, human, and logical way in these three forms, earthly as bread and wine in the Eucharist, human in the gathered community which is the people of God, the body of Christ, and logical in the preached Word that gives power to those things that otherwise would be simply water, bread, wine, sermon, mutual admonition, etc.
Lutheranism is crusty, physical, tangible, dying and rising daily, because it's Lord is like that. This is the logic that is written about in the first couple of chapters of 1 Corinthians, for example.
Sam, thanks for asking these questions, and I hope the responses have proved helpful. Feel free to respond.