I've read the text of the address, and what seems to be the problem is a few paragraphs. I have copied the relevant paragraphs below:
"In the seventh conversation ("diálesis" -- controversy) edited by professor Khoury, the emperor touches on the theme of the jihad (holy war). The emperor must have known that sura 2:256 reads: "There is no compulsion in religion." It is one of the suras of the early period, when Mohammed was still powerless and under [threat]. But naturally the emperor also knew the instructions, developed later and recorded in the Koran, concerning holy war.
"Without descending to details, such as the difference in treatment accorded to those who have the "Book" and the "infidels," he turns to his interlocutor somewhat brusquely with the central question on the relationship between religion and violence in general, in these words: "Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached."
"The emperor goes on to explain in detail the reasons why spreading the faith through violence is something unreasonable. Violence is incompatible with the nature of God and the nature of the soul. "God is not pleased by blood, and not acting reasonably ("syn logo") is contrary to God's nature. Faith is born of the soul, not the body. Whoever would lead someone to faith needs the ability to speak well and to reason properly, without violence and threats.... To convince a reasonable soul, one does not need a strong arm, or weapons of any kind, or any other means of threatening a person with death...."
"The decisive statement in this argument against violent conversion is this: Not to act in accordance with reason is contrary to God's nature. The editor, Theodore Khoury, observes: For the emperor, as a Byzantine shaped by Greek philosophy, this statement is self-evident. But for Muslim teaching, God is absolutely transcendent. His will is not bound up with any of our categories, even that of rationality. Here Khoury quotes a work of the noted French Islamist R. Arnaldez, who points out that Ibn Hazn went so far as to state that God is not bound even by his own word, and that nothing would oblige him to reveal the truth to us. Were it God's will, we would even have to practice idolatry.
"As far as understanding of God and thus the concrete practice of religion is concerned, we find ourselves faced with a dilemma which nowadays challenges us directly. Is the conviction that acting unreasonably contradicts God's nature merely a Greek idea, or is it always and intrinsically true?
"I believe that here we can see the profound harmony between what is Greek in the best sense of the word and the biblical understanding of faith in God. Modifying the first verse of the Book of Genesis, John began the prologue of his Gospel with the words: "In the beginning was the 'logos.'"
"This is the very word used by the emperor: God acts with logos. Logos means both reason and word -- a reason which is creative and capable of self-communication, precisely as reason. John thus spoke the final word on the biblical concept of God, and in this word all the often toilsome and tortuous threads of biblical faith find their culmination and synthesis. In the beginning was the logos, and the logos is God, says the Evangelist. The encounter between the biblical message and Greek thought did not happen by chance. "
While all of Islam is not reflected by their most radical leaders, they certainly are the most vocal at this time. From what I read, the Pope greatly condemned the use of violence to advance religious agendas, and called for more reasoned dialog between the Muslim and Christian worlds. The implied message was a call for their elders to take their youth in hand and set them straight. As a result of this, churches have been burned, a nun far greater than Mother Theresa was murdered, and worse may happen still. More analysis is here, but this should have been a tempest in a teapot. Instead, terrorists are using this as further "proof" of why a jihad is needed. Many of these same groups, if Pope Benedict XVI were to read the weather report, would cite this as a further example of his hatred of Islam. I'm no Catholic, but I think it would be far more accurate to say that Pope Benedict XVI abhors violence in the name of religion, and I'm sure this is a position with which most can agree. I may not always like or agree with Pope Benedict XVI, but I think he had a point.