Part 1 showed how Christian writers eventually came to the conclusion that the State was not the result of Man's sinful nature, and had validity of its own. Part 2 talked about how the Church tried to assert its dominance in the Two Swords metaphor, especially with Pope Boniface VIII's Unam Sanctam.
Immediately after Unam Sanctam, John of Paris wrote De potentate regia et papali ("On royal and papal power"). John was a Dominican who may have been a pupil of Thomas Aquinas. His work intended to defend the rights and standing of the French king. His argument was that autonomous political institutions existed before Christ established the Church. They were therefore created by human nature, which was created by God. There was no reason to suppose that political institutions such as nations (or their rulers) owed anything to the Church.
Things got more heated in 1323 when Pope John XXII tried to interfere in the election of Louis IV of Bavaria, saying it was not valid until the pope confirmed it. Louis had himself crowned Holy Roman Emperor in Rome anyway. A quarrel ensued in which William of Ockham, currently under the protection of Louis for supposed heresies, took part. Ockham's approach was not just to give the State its due as ultimately an institution that is approved by God. His approach was that the monarch is granted his power by the collective consent of the governed. The pope, therefore, has no power to interfere in a nation's elections.
Moreover, Ockham said that the pope may well be the Vicar of Christ on Earth, but that does not mean he should be allowed absolute authority. There should be a check on papal authority, a council that advises and can overrule him. Many of the established religious orders worked this way.
Although popes may have opposed this idea, it took a council, the Council of Constance in 1414, to resolve the Western Schism started in 1378 when two men claimed to be the legitimate pope. Still, the relationship between Church and State will be debated forever, I am sure.