Being offensive is an absolute right. No legal action and no violence should be brought against anyone, anywhere, for being offensive.
But let's not get carried away. Being offensive, is not, in itself, a good thing. Other things being equal, it is better not to be offensive than to be offensive. There are, however, many things more important than not being offensive, and so it is sometimes necessary or desirable to be offensive.
If we take The Satanic Verses, or Jerry Springer, the Opera, they both offended a lot of people. They are both, in their different ways, artworks and pieces of entertainment, and their producers felt that their value outweighed any offense they gave. Right or wrong, that was their decision to make.
In the case of the Danish cartoons, I get the impression that the whole point was to be offensive. If so, I'm not able to say it was a good thing to do. What is praiseworthy about insulting people for no reason? Offensiveness is a right, but it's not a duty. People must put up with being offended, but they are not required to like it.
So now we have the fallout. Many people were offended, and responded, some in legitimate ways, some in illegitimate ways. Violence is unjustified. Complaints are justified. Threats of violence are unjustified. Boycotts are justified. Demands for changes to the law are allowable, but should be refused. Demands backed by threats of violence are wrong.
In the face of this reaction - some of it illegitimate - it has been suggested that it is good to reproduce the cartoons, either to punish those who overreacted, or to "draw fire" from the original publisher. But this also adds to the original offensiveness, and dilutes the effect of legitimate criticism as well as illegitimate threats.
In reality, one side is trying to radicalise their section of society by exaggerating the original offense, and using it as a provocation. This was even more blatant over the Satanic Verses affair, where almost nobody who would be offended would ever have even heard about the offense without strenuous efforts by their "leaders" to bring it to their attention.
Against that, the other side is trying to demonstrate its attachment to, and unwillingness to compromise, its freedom of expression, and, less admirably, to demonstrate its power to be as offenive as possible.
I think it would be better to stand firm, but not to antagonise. Remember that there are many people who are offended, and who are entitled to be offended, and who have not threatened violence or otherwise stepped beyond the bounds of civilised behaviour. In dealing with retaliation, concentrate on the retaliation itself, and do not dwell on the insufficient reason for it. Basically, pretend that the reaction that occurs - withdrawl of ambassadors, or whatever - is completely unprovoked and act accordingly. That is better than the "escalating" response of repeating and amplifying the original, insignificant, offense.
As I discussed last year, I think we can best deal with the intolerant by calmly insisting that the right to free expression is inviolable, while at the same time discussing the content in question rationally, and treating any calls for acutal censorship as "ceremonial" - part of the normal process of objecting to something one doesn't like, but not serious proposals. Unfortunately, this approach is undermined by any censorship we do have, such as the "inciting hatred" laws which weere used unsuccessfully against the BNP, and which are currently being expanded (fortunately less than the government wished).
Of course, if the point of the cartoons really was solely to be offensive, then there is not really anything of substance to argue, which is a shame.