So a couple observations.
One, I think it’s important to assume good intentions on the part of everyone concerned. Fred, Tieran, and presumably others read the story as a critique of American power, with the presumption that the narrator is essentially the story’s villain, and readers are meant to recognize that what he’s doing is horrible. I presume this is what Kris meant as well.
I also presume good intentions on the part of the reviewer. This was Dwale’s honest reading of the story. The story presents an extremely stereotyped, mean-spirited view of Muslims, of the sort that’s often used to justify committing atrocities against them, and to him, the text fails to challenge that viewpoint in a robust and convincing fashion. Because this viewpoint is held by the POV character, if the text doesn’t challenge it, it effectively becomes the viewpoint of the story.
“But Chipotle, both Dwale and Fred can’t be right!” Well: yes and no. Dwale saw a flaw in the story that Fred did not. Fred’s reading was almost certainly the intended one, but we can write stories that give insult or even cause genuine harm without meaning to. It’s easy to point to stories from a century ago with what now look like glaring, objective flaws. Good intentions are not a get-of-criticism-free card.
Two, there’s a term we use in technical writing, “subject matter expert,” and we also use SMEs for fiction writing in practice. Nobody thinks that it’s a bad thing to talk to a real soldier if you want to write about soldiers, or a real astronaut, or a real computer programmer. If we don’t do that, in fact, we’re likely to hear from actual soldiers, astronauts, or computer programmers about what we got wrong. Well: when you hear a term like “sensitivity reader,” instead of going all argh pc sjw cthulhu fhtagn at it, realize that what it really means is just another kind of SME. If you’re not transgender and you’re writing about a transgender character, it behooves you to have a transgender beta reader or two. The same is true for women, or black people, or, yes, Muslims. This isn’t a guarantee that you won’t offend somebody somewhere, no; it never is. But it’s probably going to help you tell a better story.
Also, there are some implicit uncomfortable truths in that last paragraph. You may not like the idea that criticisms from SMEs matter more than criticisms from others, but if your story is explicitly making a moral argument involving the subject matter they are expert in, they do. You’d better consider those criticisms, even if they piss you off. That doesn’t mean you have to agree, or take the action they want, but again: it behooves you to understand them.
Three: I don’t want to get into the whole can of worms around the word “censorship”; the common argument that it can’t be censorship if it’s not the government doing it is not really accurate. But I also don’t think this qualifies as such. You can disagree with FurPlanet’s decision here. But this is, as far as I know, the first story they’ve retracted in their operation, and I don’t buy that it represents some kind of ominous slippery slope.
Last but not least, bringing up the real pro-terrorism children’s show mentioned in the story (which, incidentally, was addressed explicitly in the review) seems awfully close to me to defending the story not on the grounds that the review misreads its intent, but on the grounds that it’s okay for the story to intentionally be anti-Muslim because some Muslims do objectively horrible things. If that’s not the defense of the story you want to be making, which it should not be, then I suggest dropping it pronto.