Leaving aside (for now) the difficult question of endorsing Plato's censorship and state-controlled media, Augustine argues that Plato was right to expel the poets from the city. I think this gives us a foretaste of how Augustine is going to ultimately view Plato: Plato (along with a number of other wise pagans) is right about something outside of himself, while remaining an unrepentant sinner internally. Having agreed with Plato's statement about the arts, Augustine goes on to say "We for our part, indeed, reckon Plato neither a god nor a demigod; we would not even compare him to any of God's holy angels; nor to the truth-speaking prophets, nor to any of the apostles or martyrs of Christ, nay, not to any faithful Christian man."
In other words, Plato's speaking the truth notwithstanding, he himself has no part of the truth that we as Christians share. This will come up again in City of God.
The way we set up and worship our gods is ultimately a reflection of our own sin. Even the elevation of Plato to the status of 'demigod' shows the true nature of the pagan religion: self-worship. This is shown by the fact that Romulus (a Roman) is preferred to Plato, all the Greek divinities, and even the Roman versions of the Olympian gods themselves. There's probably a parallel that could be made here to George Washington and the American treatment of the Founding Fathers, but I don't know that I'm the person or this is the place to make it.
Morality is the one thing which everyone agrees upholds the state, and it is the one thing which the Romans do not get from their gods. In fact, they've had to outsource their lawmaking to the Greeks (for whatever that's worth). When we take into account everything Augustine has been saying about the gods and their love of the theater, it would even seem that the gods are at odds with morality and so are working for the downfall of the state.