I agree with you about the state of affairs between Muslims and Christians, and lament the "thinly disguised totalitarianism" that relativism has become in Europe.
But SD, you did not address the Church's social doctrine. Is what you're saying Pope Benedict did consistent with the teachings of the Catholic Church? Please excuse the length of this response, but precisely because I want the Church to speak for herself in these matters, I am devoting a large portion of this blog to a text from Vatican II.
The union of the human family is greatly fortified and fulfilled by the unity,
founded on Christ,(10) of the family of God's sons.
Christ, to be sure, gave His Church no proper mission in the political, economic or social order. The purpose which He set before her is a religious one.(11) But out of this religious mission itself come a function, a light and an energy which can serve to structure and consolidate the human community according to the divine law. As a matter of fact, when circumstances of time and place produce the need, she can and indeed should initiate activities on behalf of all men, especially those designed for the needy, such as the works of mercy and similar undertakings.
The Church recognizes that worthy elements are found in today's social movements, especially an evolution toward unity, a process of wholesome socialization and of association in civic and economic realms. The promotion of unity belongs to the innermost nature of the Church, for she is, "thanks to her relationship with Christ, a sacramental sign and an instrument of intimate union with God, and of the unity of the whole human race."(12) Thus she shows the world that an authentic union, social and external, results from a union of minds and hearts, namely from that faith and charity by which her own unity is unbreakably rooted in the Holy Spirit. For the force which the Church can inject into the modern society of man consists in that faith and charity put into vital practice, not in any external dominion exercised by merely human means.
Moreover, since in virtue of her mission and nature she is bound to no particular form of human culture, nor to any political, economic or social system, the Church by her very universality can be a very close bond between diverse human communities and nations, provided these trust her and truly acknowledge her right to true freedom in fulfilling her mission. For this reason, the Church admonishes her own sons, but also humanity as a whole, to overcome all strife between nations and race in this family spirit of God's children, an in the same way, to give internal strength to human associations which are just (Gaudium et Spes, par. 42, emphasis mine).
The Pope and therefore the Church are pro-humanity and pro-dignity of the human person before being pro-Europe, even if the European culture is predominantly Christian.
Because this blog is already very long, I will address one last issue where you say, "Islam may have a few truths, and insofar as they live in accordance to that truth, Islam has dignity, but even that is a double-edged sword. The truths they do have only make their untruths all the more potent." The Church is the champion of the dignity human person. We have to presume upon that dignity ALWAYS even when the person exhibits violence and irrationality.
Explain to me how what you propose the Pope is doing is consistent along these lines, especially when you yourself describe the situation as the Muslims "falling for it." The Pope did not only say, "I'm sorry you were hurt"; he also said, "In no way did I wish to make my own the words of the Medieval emperor...I wished to explain that not religion and violence, but religion and reason go together."
For me, Pope Benedict exhibits humility and strength. On this point SD, I second your "bravo."