My thoughts would be that:
1) Divine purpose wasn't making the power (defaulting as Incite Emotion) less powerful, it was combining with the increased flexibility of being able to do blessing and curses to 'even out'.
2) I guess I didn't specify, but the attack would be treated as 'Holy', which is considerably better than 'normal' physical. But you could stick with mental instead, if you prefer. In fact that might be more appropriate, since the touch of the divine on an unholy creature might well be desribed in terms of psychological trauma more than mere physical trauma.
3) Ah, cut'n'paste error ('mental consequence' was from the original Incite). Should be physical, in which case the change in #2 seems best, in which case leave it as is. As to the Divine Curse, I suppose it could be spelled out better. The tope-level description makes note that the Blessing itself could count as a 'Divine Curse' when applied against appropriate enemies, and 'Holy Touch' makes use of this more hostile side of the power, thus the wording.
4) This is the tough part, and why the power would require significant adjudication. The short/clear answer would be that it can be used in the sorts of situations that Holy Touch or a Sword of the Cross could be used. The longer/vague answer is that it can be used in situations that Divine Purpose doesn't keep it from being used. So for example, you couldn't walk into a bar and smack someone upside the face with this power (or use it to defend yourself in the ensuing barfight), but you could use it to defend yourself (or another innocent victim) against a mugger or subdue him (non-lethaly).
Given the limitations, the attack aspect of the power is weak compared to Incite in that it can't be used against just anyone for any reason, as Incite can. But given that it's Holy, there is a strong edge in certain types of combats. This benefit is edged out if the fdamage is mental, in which case the weapon rating should perhaps increase a bit.
But its at best a work in progress, so feel free to comment or critique.
This probably makes it weaker relative to Incite, which means that the scope should probably be expanded to include, for example, self-defense or the defense of (deserving) others in situations where those being defended do not deserve to be attacked