This time Ratzinger is sound, those who criticized him misunderstood him (at times willingly). Ratzinger may be a conservative pope (I for one do not share his conservative values), but he is not a bully or a shallow thinker. He's an intellectual who expressed very complex thought and has been misunderstood by extremists in Islam and by liberals in the western world.
With his speech he wanted to stress various points, many of those were sensible; in particular the idea that the holy war is against the will of god.
Perhaps, misunderstanding was inavoidable --some people say in Europe. Their argument is that we are dealing with too sensitive topics to make deep quasi-academic comments. These ideas are bound to be misunderstood --they say.
I personally believe that some extremist people desperately want to misunderstand the message given by spiritual and political authority in the west. This gives them the necessary legitimacy to motivate people who do not have direct access, or enough education to understand the message sent from America or Europe.
There's hardly something Ratzinger can do about it. There's hardly something we can do about it. We are desperate to engage in a serious conversation with the Islam, but there are some extremists who want to prevent this from happening. They want to raise the voice and prevent the dialogue as they know that the point in all this is not to communicate with us; instead they want to provoke us into splitting into two or more factions, just for the sake of weakening our positions.
We don't have to fall prey to this strategy. We should refrain from condemning Ratzinger for taking a position and arguing in favour of it. We should try and understand what he says and engage in a further conversation with him and with the Islam in oder to further a more stable world.