The argument comes from a place of privilege, is egregiously reductionist, and completely ignores simple precepts like yelling "fire" in a crowded theater.
"I'm not a proponent of unlimited free speech. It's those grey areas that concern me. Like, using Hitch's example, is holocaust denial hate speech or an incitement to violence? Under certain circumstances, I imagine it would be. It's easy for me to say it should be allowed because I know the majority of society right now would dismiss their claims, but at what point (in terms of the percentage of society) would I start to feel uneasy about the idea being discussed? Is it better then to censor it outright? What if, as Hitch says:
... Might contain a grain of historical truth; might, in any case, give people to think why do they know
what they think they already know.
The problem, as I see it, isn't even about incitement to violence. There's plenty of Holocaust denial that isn't an incitement to violence, unless by stretching that term far past its breaking point. It's not even really hate speech, in a strict reading of that term -- it only becomes defined as "hate speech" because we know that it originates from people who have had more explicit hate speech restricted.
But that doesn't mean it's without harm. These "questions" are really assertions that rather than being killed en masse, Jews have in fact inflicted great deception on the world. That creates mistrust -- sometimes violent, but more often merely prejudicial. Those prejudices can take effect in myriad ways, impossible to trace to the questioner, but nonetheless real.
Would a smart person like Hitchens be fooled by this? Surely not. But then again, he doesn't even seem to consider that it's a possibility. As you say, he seems to think that violence is the only way harm could be inflicted, and nothing else seems to be involved. That's a blind spot.
That blind spot is important here, because his entire argument is based on "Let people make their arguments and surely we'll come to the right conclusion". I don't believe he himself is capable of coming to the right conclusion because he's missing something right in front of him -- something somebody must surely have pointed out at some point, but which he doesn't even consider to be a problem worth mentioning.
If Hitchens had said, "I've weighed the two potential worst cases against each other, and I believe that the harms of protecting Holocaust denial are something that we can all live with", then I'd consider it a valid opinion. As it is, this quote strikes me as shallow and poorly thought out.
He's reduced a complex balance to a simplistic decision by excluding any input from the people at the most risk of harm. If he were Jewish, I doubt he'd have written that paragraph. The strongest advocates of unrestricted speech always seem to be those who have the least at risk, and the risk to others seems completely invisible despite their supposed attachment to hearing from everybody. He's taken refuge in exactly the opposite "false security of consensus".