That expression originates w Christians believing that a sneeze meant demon possession...LMAO!

I either say "thanks" or I do nothing. The old superstition that this goes back to says you are so close to death when you sneeze. I suppose they mean that short time you are not breathing just before you sneeze. (Who Knows?) The "bless you" and "god bless you" comes about because you did not die. God did not take your breath away so you are blessed with continued life.
As to when people started this nonsense I am not sure.

I tell them i don't play the waiting game with them! I run my own life how i want! Period!!

There are so many times people including myself use religious terms as its so ingrained in our society so I don't think much about it.

I say Thank You for a second time.

Usually quote a line from a famous movie in just as loud tone as the sneeze made (I try my best James Earl Jones voice). I have a few go to lines......."You complete me", "We need a bigger boat", and the ever classic "That'll do pig, that'll do. Be prepared to run if you use the last one.

I thank you. Glad I did not blow my head off.

I say 'excuse me' same I'd do if I burped or farted. Seems to make more sense for me to say that than for them to say 'bless you'

I also say "thank you" and think nothing else about it.

"Thank you" usually suffices.

It's a figure of speech these days, why get hung up about it?