What this judge said is definitely newsworthy. Some random anonymous user on twitter who is probably trolling, stoned or both saying something means bupkis.
Although I did get a laugh out of Colbert's take - "705 people saw a woman in a bikini and thought, 'Muslim Extremist.'"
http://gawker.com/stephen-colbert-had-the-perfect-response-t...
Context is everything. They didn't just idly identify her as an arab as in "Wow, an arab finally won Miss America" - they called her an arab as part of a larger effort to associate her with terrorism and debase her as being less of a person and therefore undeserving of winning.
Just because a racist is illogical in their hatred doesn't make their hatred any less real.
Free speech does exist. But do remember that any free country also stipulates that the freedom comes with the responsibility that you do not use your freedom to hurt others.
Joe Random twitter user can't hurt anyone by being an asshole on twitter.
The real free speech issue here is that freedom of speech runs both ways -- you are free to speak out and everyone else is free to speak out and criticize you for what you said.
There is a distinction between "hurting someone" as in "yelling fire" in a crowded theatre to "hurting someone" as in going on twitter and spouting random crap. Sure, you can sue for emotional damages or whatever if you please. However, it really is not the same thing. At least the way it works in America. I know that in some European countries, one's free speech rights are limited (e.g. when it comes to holocaust denial or whatever).