I am not sure what to make of the controversy over the Pope's speech at Regensburg. It is certainly true, as Dad29 points out, that the speech was not really concerned with Islam, but the western separation of faith and reason. Having said that, he clearly shot one across someone's bow. Given the global controversy around Islam, anything that is said on the subject by the leader of one of the world's largest religious tradition is going to get attention.
And, although I am no scholar in the philosophy of religion, he seems to be saying, apart from the citation to Khoury (relating a medieval comment that all that was in the Koran was evil and inhuman), that the Islamic and Judeo-Christian concepts of God are different. Muslims, the Pope seems to be saying, are more likely to see God as absolutely transcendent and not bound by - or, perhaps more accurately - choosing to act within - the strictures of rationality. Thus, the concept of conversion by force which, for the Pope, is contrary to the dictates of faith illuminated by reason. (Christians may have done this, but, unlike Islam, there is really no support for it in the foundational text.)
I don't know enough about Islam to know whether its true, but the Pope had to know that this was a provocative thing to say. It may well be a shot across the bow of radical Islam, but it may also be a challenge to the West of the dangers that are presented by both faith and reason when the two are relegated to separate realms.