No one says that Muslims can’t worship or build Mosques. The building of the Ground Zero Mosque is a local issue and just like local municipalities determine wrong headed zoning laws or strange regulations on height’s of shrubbery in a community the people of New York are the ones who must determine what they would like to see.
Also, would it be okay for me to set up a church for my particular religion next to an elementary school if the teachings of my religion condoned child molestation? I may not personally believe it or even participate in it but if that particular teaching is in my religious books then what you would say?