The business relationship is a two way street. Fortunately for Rackspace, they're in a position where they can pick their customers.
Regardless of how you feel about burning Qurans, Rackspace has the right to recognize that one of their hosting customers is doing stupid things as a result of religion – and to decide they want no part of it. For simple liability reasons alone this may be a good idea – who knows what violence this idiocy will inspire.
If I were running a hosting company, I'd be wary of permitting religious content of any sort, much less the "my religion is better than your religion and you should get out of my country/planet" sort.