Because few people bother to read rebuttals. The initial explosive accusation always gets the most eyeballs and then takes forever to go away. This is why slander and libel are such big deals in corporate and political worlds.
I personally think Marco could have chosen a better response, however the talk about censorship are absolutely laughable. If his customers disliked the move they could jump on one of many other alternatives (it's not like Marco has a monopoly on "read it later" software).
You don't have to have a monopoly to engage in censorship.
Marco decided that the right solution to a shouting match was to take hostages. If you think that's okay, I don't know what to tell you.
If Marco had actually been libeled, then the proper recourse is to bring it before a court of law. If he just had his feelings hurt, then the proper recourse is to take a stand in the court of public opinion. In neither case is the appropriate response to throw a temper tantrum.
You would have to be a "controlling body" (per wiki) to engage in censorship. From the article it sounds like Instapaper is a bit player in the world of news and regurgitation thereof. Imagine if you write a news app for the iPhone but never display content from websites you find objectionable. If this means you're engaging in censorship then every bit political blog is guilty of the same.
Marco explained that he considered a libel suit, but thought it was an overreaction and instead settled for what he wrongly believed is a middle ground. If you think I am defending Marco's actions then I don't know what to tell you (besides the fact that you misread my comment). My bemusement was at the rampant and sensationalist cries of censorship.