"...who pray for their loved ones, and long to flee misery and skip death. It is a weakening and discoloring idea, that rustic people knew God personally once upon a time"
Dillard, through this quote, is revealing the overarching theme of one's faith in the God. Death shall return you to his glory, but those who live in fear of death and pain do not know of His greatness during our final hours, and eventually, all of eternity.
“There is no less holiness at this time- as you are reading this- than there was on the day the Red Sea parted..."
Dillard is explaining how though the world has immensely changed since the days Christ's human form walked the earth, there is still enough holiness and virtue in the world today. We may still accept Christ today, as many did in the past.
"We don't fall in rows like hay, but we fall. Once we get here, we spend forever on the globe, most of it tucked under."
As generations had come by, the people may not match their previous generation perfectly, yet they may be fairly close. Generations in this world must learn to accept Christ, from another more pure and eternal world.