I'm the guy who wrote the original post at Democratic Central about these racist shorts; glad to see you're discussing the issues.
Personally I think racism is hilarious -- not because ethnicity is funny, but because racists are idiots. "Racist humor is like fugu" -- exactly right, but with a caveat. Mencia does racist humor, and it's not funny. Sara Silverman is a great example of what she calls "meta-racism" where you use a racist persona to make fun of the racists. It's the Stephen Colbert approach, and it's hilarious when done really well, but that's not what fox was doing. Fox wasn't pulling a borat -- where you use meta-racism to expose actual racism in others.
Let me also say that no one "fell asleep at the wheel" here. Advertisers don't do things like this by accident. I've written ads, I know. When I said these ads were "textbook" examples of tacit racism, I wasn't kidding. There are textbooks written about the southern strategy, the way you can invoke racist imagery without putting it on screen. If you put it onscreen, people know you're being racist, and they don't like it, but if you just frame it, and let people fill in the rest ("That's funny, because arabs are terrorists who go to a lot of detention facilities"), you've got 100% effect, with zero liability.
Don't let these guys skate on their easily-contrived plausible deniability. It's not hatespeech, and it's not inciting violence, it's just reinforcing pre-existing racial prejudice, and while it doesn't deserve too much outrage, it at least deserves our scorn. Thanks for reading.