big ole terrust me
don't you think that Xbox Live's closed system warrants some heavy editing in what could be considered it's developing years? I'm guessing in 20 years they'll have "adult zone" where your name can be "ButtFucker420potlol" and you can post pics of your balls, but right now, they have a lot of PR concerns. It's justifiable and reasonable...not only in the contractual sense i.e. you agreed to their terms, but also that Xbox Live is a great target for a political witch hunt. Right now, the generation gap is as large as it will ever be in any point in history (until the 20 and 30 somethings get in control...)
it's stupid and contradictory, as you can go on Halo 3 and get called a distinguished black fellow 30 times per minute with no consequences for anyone, but it's one of those PR things.
Just saying that I think it says less of MS than it does of the political climate.