What does it mean to insult someone?
We're all familiar with the basic schoolyard approach to insults. They usually involve making some outrageous unflattering claim, often about the target's dietary or sexual practices, as a result of which presumably we are to hold the target in lower esteem. Personally, I was never much offended by the content of this sort of insult, nor much impressed by those who uttered them, perhaps because I have a tendency to interpret and analyze things literally. If someone alleges that I mate with iguanas, I'm more likely to be puzzled than offended: such a preposterous claim should reflect more on his credibility than my respectability.
Even in those instances where what was revealed about someone happened to be true, ("Billy's wearing green underwear!") it never made much sense to me that this should embarrass Billy. After all, we probably assumed he was wearing underwear, and it had to be some colour. I'd have thought it more embarrassing to be seen as having any interest in knowing the colour of Billy's underwear, and thus I always felt it was the insulter who should be embarrassed rather than the insulted. And I always felt just a little bit insulted as a member of the audience to such games, because the insulter who gleefully tells me the colour of Billy's underwear is implying through that speech act that I am expected to care.
That's the sort of thing that insults me. Not words, not statements of belief that I am unworthy, but clear demonstrations of that belief. You may say that you believe I am an idiot, and that's fine; you've presented a proposition which may be true or false, and put your own credibility on the line if I prove to be otherwise. But when you act in such a way that shows you fully expect me to behave like an idiot, when you tell me something obviously false and expect me to believe it or expect to convince me with a ridiculously flawed argument, that is something I can't help taking as an insult to my intelligence. When a grandmother's knitting needles are confiscated by airport security to protect me, it's an insult to my courage. When women are expected to dress modestly for fear their beauty will incite me to rape them, it's an insult to either my virility or my self-restraint or both.
(Of course, if I am an idiot or a coward or an untrustworthy dangerous animal, it may be perfectly appropriate to treat me as such.)
And so what does it mean to insult Islam or its prophet or indeed any religion? Who or what should feel insulted, when someone makes a satirical film or a cartoon depicting the Prophet in an unflattering way? If what is said is false, well, does this not reflect poorly on the speaker more than it does upon the Prophet, and call for no more punishment than being revealed for a fool or a liar? And if what is said should be true, then it is either irrelevant and nobody's business (as in the case of Billy's underwear) or it is a relevant and legitimate criticism, in which case it is perfectly appropriate to act in accordance with it.
Actions speak louder than words. When, claiming to act on behalf of Islam, you storm an embassy and murder people because someone else thousands of miles away made a fool of himself, you demonstrate that you believe Mohammed to be an arrogant, vindictive and thin-skinned bully who resorts to violence rather than reason. If that belief is false, then it is you who insults the Prophet with your actions. And if it is true, then it is a perfectly legitimate basis upon which to criticize the religion.