I think it comes down to they can legally, but they probably should not due to the repurcussions. Same thing goes for the ground zero mosque.
It's legal to burn anything in a controlled environment as long as it's not physically harming anyone...but is it wise to do so? Absolutely not. Should media outlets bare some responsibility for giving radicals like the gentleman down in Florida this much exposure? Yes, it's irresponsible and could have resulted in more death and destruction. (of course, freedom of the press is important as well, I'm not disregarding that...it's why the issue is a toughie!)
as for the "Ground Zero mosque," another tough issue. I find myself leaning in favor of allowing this because from everything I've read about this community center, there is nothing indicating that it would have anything to do with aiding terrorists or waving "a victory flag." Heck, the locale should be easy as pie to monitor...so FBI could have a field day secretly overlooking the place. (again, ethical? debatable.) The only loser in this whole thing was the group that sold and probably lost money on the deal. If they played their cards right, they could have set up a "holy bidding war" with different faiths each outbidding the other until the price skyrocketed! Another smart business person in this area should consider selling his or her business to the highest bidder. If they are lucky, they could generate a holy bidding war, sell to the highest bidder, and retire.
p.s. and then again, I could be completely wrong!