How does the story condemn religious hypocrisy?
Early on in the story, Irving condemns the persecution of different groups on the grounds of religious intolerance. Later on in the story, however, he more explicitly denounces the hypocrisy present in so many religious figures. Old Scratch claims that Deacon Peabody is going to be damned unless he starts worrying about his own sins as much as he worries about the sins of others. At the end of the story Tom Walker is a religious zealot by day, but still continues his corrupt business practices. Irving clearly believes that, where religion is concerned, it's essential to practice what you preach.