The astonishing decision of Pope Benedict XVI to revoke the excommunication of, Richard Williamson, a Bishop who denies the holocaust has been cast as a blow to interfaith relations. It surely is that; Jews appropriately believe that Holocaust deniers are the worst order of evil anti-semites. To reward such a person is, for most Jews, simply unfathomable.
But there’s a broader point. The Church no longer gains its moral authority from historical momentum. It builds it from its own behavior. That’s why the pedophilia scandal affected members views not just about internal policing but about the Church’s moral authority in general, even on unrelated issues. It looked like the Church was deeply moral in its external pronouncements but morally adrift when it came to protecting its own people.

This feels similar. To repair an internal rift with a schizmatic group, a practical gain, it gave away an important chunk of moral authority.
Alas, it was just last week that the American Catholic church was showing itself to be perhaps the only American religious institution that following a consistent moral philosophy uninfluenced by tactical politics. What am I referring to? They were the only ones to both attack Obama’s repeal of the Mexico City abortion “gag rule” and also praise Obama’s anti-torture order. You can disagree with the church’s position but one has to respect that they followed a consistent theology, whether it went in favor or against Obama.
For the most part, progressive religoius groups were loud in praising Obama about torture and quiet on Mexico City (even when they disagreed with him), while conservative religious groups inverted the approach, attacking Obama on abortion but remaining quiet on torture (even when they agreed with him).
Not the Catholic Church: they viewed both their pro-Obama torture position and their anti-Obama abortion position as part of the same commitment to human rights.
They were rebuilding their moral authority. Now where is it?
UPDATE: As some readers have noted, Amy Wellborn has an excellent summary of the internal Church issues involved — though that doesn’t eliminate, for me, the broader moral issues about reaching out to a Holoocaust denier. And David Gibson cogently describes what this means for the status of Vatican II.