The facts are simple, but the White House spin is (as ever) winning.
Muslims throughout the world are hating the United States because we've invaded and ruined Afghanistan and Iraq. They might have let us get by with Afghanistan, because our cause there was justified; but because we bungled the occupation there, took over Iraq on false pretences, and continue to mangle both countries, they're rioting in protest.
They also hate us for our treatment of innocent captives, both in those countries and at Guantanamo Bay. We are, without doubt, torturing people, principally because of their nationality and religion, who have nothing to do with terrorism or armed conflict.
Newsweek published a two-paragraph item on that torture, including a detail that had been published many times over the past year or two, namely that interrogators at Guantanamo were vilifying Islam as part of their interrogations and had flushed a Koran down a toilet. Riots grew in Afghanistan. The Chairman of the Joint Chiefs of Staff specifically said that the riots weren't due to the Newsweek item.
And now that Newsweek has backed off that part of the note (6 words out of 300), the White House wants to make their retraction the story; they want us to believe that the Chairman of the Joint Chiefs is a liar, and they want us to think that somehow it's more evil to publish common knowledge than it is to conduct a Crusade against millions.
Keith Olbermann calls bullshit on the whole affair.
Update: Time declared powerlineblog.com its Blog of the Year. In a May 15 "Footnote" entry at Power Line, the lie that Newsweek's reporting is worse than torture was made explicit:
I really think that calling Newsweek's blunder "the press's Abu Ghraib" is unfair to the low-lifes who carried out the Abu Ghraib abuses. After all, they didn't even hurt anyone [lie], let alone kill them [lie]. And the people they abused were almost certainly terrorists [lie].
Bracketed notes mine, mendacity in the original. Bonus evil points for the pass-the-buck meme that Abu Ghraib was just the work of a few bad apples...