So far, this has been a very nice story. Of course, I expect great things from your stories, since - with one or two exceptions - I've liked them all.
I particularly like this story's version of Snape. I can see this version of him as a spy, and not just a bully. He might not like Harry, but he's smart enough to figure out that his best bet to earn points with the "Fourth Faction" is through Harry.
(One of the few things that I liked about Deathly Hollows is that the facts show that Severus Snape did what he did for himself. No matter what Dumbledore might have liked to think.)
Likewise, I consider how Albus Dumbledore is acting in this story to be in character. He's so caught up in the ideal that people can be redeemed - after all, he turned away from "the Dark path" - that he doesn't seem to get the damage he's letting these people do. Plus, it's hard not to get the idea - from the books - that Dumbledore might have bought (at least partially) into his own press, and thus believe he knows best.
As for the comments about how not rejecting "Muggle" culture would hurt Hermione in the British Wizarding World, I can believe it. As much as I like him, Arthur shouldn't have been head of the Misuse of Muggle Artifacts section of the Ministry of Magic. He doesn't know enough about the Muggle world. Even though I don't doubt that he got an "O" on his Muggles Studies NEWT at Hogwarts. (Which in itself is pretty damning of the British Wizarding World.)
I'll be eagerly awaiting the next chapter!