Apple really needs to learn the difference between content in the application and content available on the internet when they review app store submissions.
In their latest fumble, Apple rejected Eucalyptus, an e-book reader which contains absolutely no embedded content. It lets you read freely available books from Project Gutenberg, which it fetches from the internet. Their reason for rejection: “offensive content”. The book in question (the Kama Sutra) can already be read on the iPhone with Stanza or any other e-book reader or even Mobile Safari.
The fact is there’s offensive content on the internet. No matter what Apple does, almost any application that accesses the internet will be able to find it if you try hard enough.