The uploader will be banned and their content removed, and hopefully will have to deal with the police. If a PeerTube instance is too laxist about its moderation policy, other instances will stop federating (federation is opt-in and decided by the admins).

So how can they call it "censorship resistant" if you can just ban users and delete their content?

The platform is censorship resistant. Individual instances are not. If you upload something to a specific instance, you are at the mercy of the instance owner. But you can upload to other more "open-minded" instances or host your own.

Moderation is necessary, otherwise you'll attract "undesirables" that will most likely scare away regular users.

Check out the "Who is responsible for content published on PeerTube? " bit in the faq at https://joinpeertube.org/en/faq/

Banning and choosing not to point at something are two different things.

or copyrighted material. this could open up peers to civil infringement suits from the MAFIAA which could have a chilling effect on new participants.

If the country the instance is hosted in has illegalized child porn (japan for example allows some forms of child porn and it's normal to consume those), then the instance will likely take it down fairly quickly. If they don't they might be unfederated by other instances that definitely don't want this.

It's censorship resistant because each instance is an island and yet every island is connected. As long as someone is willing to host your content, people on the fediverse can consume it one way or another.

The person responsible for that PeerTube instance would have to remove it, and hopefully ban the user and report them to the authorities.