The problem is that peaceful play is too single player. There's just no good reason for peaceful interaction with people outside the safe zone. A PvP-er can invest effort into interaction with other players and get rewards. The peaceful player really has no options for investing effort and naturally gets no reward. That may be balanced, but it's a very bland balance. What I'd like to see is efforts and rewards for both, different but equally intense. There really needs to be something that will drive peaceful interaction between players, because a sense of community is vital for retaining people that play for the social aspect.
The devotion thing could be a good way to get this going. A town could build a church and decorate it with all sorts of bling to attract neighbours to the mass, and both the attendees and the town would gain something. Of course, you'd need to somehow avoid encouraging alt spam, but I think it can be pulled off.