I personally think that we get bogged down in 'terminology' & 'self-righteousness' !
As I understood Quaid-e-Azam & his Pakistan to be - He never wanted a State that would be Theocratic but like Iqbal he never wanted a Secular State either & the fact that we often see 'States' or more so 'Political Paradigms' through such a bipolar lens is the reason why we presume that there are only two 'right' ways to go about this. My own understanding of Jinnah, Iqbal & after reading what some of the people who were associated with either of the two or the Pakistan Movement, I believe that they simply wanted a Democratic State where Muslims would be allowed to live freely & without prejudice but also a State where in the words of Iqbal, 'we'd have the chance of removing the stamp of Arab Monarchy from Islam' (Iqbal's Allahbad Address) & develop different Islamic Paradigms to breath a new life into Islam & bring it on par with Modernity & the many Contemporary Discourses & Paradigms out there.
Unfortunately - None of that came to pass & the Pakistan of Jinnah & Iqbal, as I understood it to be, remains ever elusive till this date.
As far as Nationalism is concerned - An excess of anything is extremely harmful & none more so than Jingoism that propels are person to do terrible things in the name of 'My Nation'. I think what Iqbal & Jinnah were aiming for, in this context, were two things :
(i) Muslim Nationalism, in that we transcend our ethnic & linguistic differences which pits brother against brother & recognize our commonality as adherents of the One God, the One Book & the One Prophet (PBUH) as Iqbal alludes to in one of his couplets.
That said it wasn't to serve as a paintbrush to whitewash our ethnic or linguistic identities but simply to take the venom of that form of 'tribalism' out of those identities, which makes one think that one is better than the other simply because one is an Arab or the other is a Punjabi.
Which brings me to (ii). In addition to this, I believe, they wanted to re-enact the State of Medina in which all were equitable & all had their relevant space to express themselves ! What that meant was that whereas a Jew & a Pagan stood by a Muslim for the greater good of 'Medina - their City', all of them had their own way in their own sphere of influence so if the Muslims wanted to have their own legal, social or economic paradigm - They get to do that ! Similarly the Pagans, the Jews & the Christians had this chance as well.
But of course, these are but my own views & could be correct as well as terribly incorrect !