So the real concern becomes, what happens when someone encodes something illegal in the block chain. As a trivial example, what happens when some sort of copyrighted material is embedded in the block chain. Can a country's court prevent it's citizens from participating in the bitcoin transactions as they hold a copy of the illegal material?
So the call is for a system whereby we bypass any legality issues by ensuring that encoding information in this way is not possible.
Is it an overreaction? Maybe it is, but since there may be real legal consequences to letting it continue, it seems prudent to put steps in place that prevent or hamper this possibility. Particularly as it has already been proven[0] that system has been used to store data in larger quantities.
So while the issue may or may not be sensationalized, writing ignorant and wholly incorrect commentary is not the antidote.