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In recent month the British government, led by Home Secretary David Blunkett (who resigned yesterday over a minor sex scandal), has been attempting to introduce laws against 'incitement to religious hatred' which would function as a complement to the existing laws against 'incitement of racial hatred'. As far as anyone can tell, these laws are being introduced to placate Britain's small but vocal Muslim minority. One of the interesting things about this proposal is that it has had the effect of making strange bedfellows of out-and-out secularists, nationalists, old-line conservatives and senior Christian leaders. Of course, many otherwise secular liberals support the introduction of such laws, because they have become so strongly Islamophilic over the last couple years (it's a turn of events that I find to be one of the stranger facets of British politics in recent years, but that's a topic for another day).
There are several basic objections to the introduction of such legislation. The first, and most obvious, is that Islam, like any other religion, is ideology tinted with God. In this way it is completely unlike race. I woke up white today and I will wake up white tomorrow. I was born white and I will die white. Nothing will or can change that. However, I could wake up tomorrow and become a Muslim. I won't, but I could. Islam is an ideology and as such people choose to be part of it. Ideologies are a matter of choice, but race isn't. If you truly believe in free speech it is kind of difficult to argue that certain types of believers have viewpoints that deserve special protection. Of course, I believe in basic human courtesy in dealing with opposing viewpoints, but you can't legislate for that either.
Secondly, what constitutes 'religious hatred'? If people dislike or even hate Christianity or Islam, why is that the state's business? There are already laws against 'incitement to violence,' which is enough. It is not the role of the state to punish people for their opinions on other people's ideologies. If someone is screaming 'butcher the Muslims in the streets!' then they can be charged with inciting violence.
This leads to the third problem, which is that I can see little prospect of such a law satisfying anyone. Muslim groups who have been pushing hard for it will end up frustrated when it turns out that it is much more difficult than they thought to sanction people for anti-Islamic criticisms. Opponents will be angry at the state for trying to shape opinion. No one will be satisfied.
The final problem with this legislation, as far as I see, is something that I believe is under-emphasized. That is that free speech is not just a good thing in and of itself, but also that it is good for democracy. If free speech is a given then extremists always uncloak themselves. This is, I believe, one of the key factors behind the strength of the extreme right in Europe and the weakness of their fellow travellers in America. In several European countries, like France and Germany, it is against the law to deny the Holocaust. Because of this far right groups have public moderation imposed on them which only helps them to present a message that is more palatable to the general public.
Without such restrictions in America it is much more difficult, if not impossible, for extreme right groups to maintain the discipline required to present reasoned cases for themselves without snapping into wild-eyed rants about 'the Holohoax' and Jewish conspiracies. Such laws only give extremist groups the cloak of martyrdom. Leaving them alone to say what they like (while protecting against them calling for bloody violence) generally ensures that they will remain powerless, because there just isn't that much of a constituency for the most extreme rhetoric. What is worse: having an ultra-fanatical National Alliance (in the US) who rave against 'race suicide' and the evil Jew while holding no discernible power or a more muted Vlaams Blok (in Belgium) who can command more than a quarter of the Flemish vote through a more straight-forward nationalism? I think it's worse to have a group like Vlaams Blok holding a fair amount of power than a bunch of loons like the National Alliance shouting at the margins.
The same principle, I believe, would hold true with Islam. While I have no great love for it as a religion/ideology, I instinctively recoil from the more frothing anti-Islamic rants you will see in the comments sections of sites like LGF and Free Republic. If such people were forced by law to moderate their more frenzied ranting then they (and political figures who think along such lines) would have to present a more nuanced case against Islam that would functionally create much more division, because it would automatically gain much more support among the majority community.
Update: I just want to clarify something. I know that religion is a major part of a person's identity, and that many people consider criticism of their religion to be a criticism of them personally. In this sense it is akin to nationalism, the tendency is to 'circle the wagons' under perceived attack. I'm guilty of this myself when I read hysterical generalized criticisms of America; even though I am not a misty-eyed patriot, I do like this country, and I am willing to defend it from attack. But I wouldn't dream of legislating against people disliking or even hating America. That's the point.