You can't call your immune system stupid when you have a severe allergy. It's just doing what it evolved to do.
They could undo a lot of good will (Iran elections, etc) just by censoring this one thing.
I sympathise, though. I've run email spamfilters before, and boy, people get /pissed/ when false positives happen.
I think it's wrong to state that Twitter is censoring, and is harmful. It should have been posted as a question instead.
[edit: The poster's reviewed it.]
For example, this could be the result of automated measures to prevent spamming the trending topics gone haywire. Or not. But accusing censorship without knowing the whole story is just hair-trigger indignation.
I understand that you actually mean well, and mean the question seriously, but in "Internet discussion" the question mark only protects the reputation of the asker, but does nothing to protect the reputation of Twitter.
Edit: Safari on iPhone, located in Latvia.
EDIT: And now it's not. This is too weird.
Here's what I see: http://twitpic.com/1spne4
But wtf? I click it, and I can't access the search?
edit: I can report that clicking on #flotilla in trending topics is now functional.
The hashtag is about the humanitarian aid to Gaza: http://news.bbc.co.uk/2/hi/world/middle_east/10195838.stm
Screenshot: http://grab.by/4Fiy
1) Israel is pushing Twitter to censor these terms
2) Someone at Twitter HQ blindly supports Israel
Either way it completely destroys perhaps the most important usage for Twitter: a voice for those in the epicenter of something happening.
My money is on a haywire spamfiltering system... but we will see. If the people running twitter are not morons, we'll see an explanation shortly.