<snipped> Yeah, I know about the French government and Yahoo! . . . I will refrain from impersonal attacks on the French and their government in this space. =/
There's a difference between an image of a thing someone finds offensive and an image which someone finds offensive.
And the difference is?
Consider it this way. (The following is a guideline, and does not apply in all circumstances): If you were to show an image of, say, a person, to someone who knows nothing about the subject, would they be offended? Or to some random kid: to them, Hitler is just a guy with a moustache (who is yelling something and sticking out his arm with our picture...) The image of the guy is not offensive. It's the guy himself who offends.
Consider an image of a flag being burned. It's just a piece of fabric on fire (though there's probably some sort of lovely right-wing local yokel gun nut holding it as well :). The image itself is not offensive, it is what the image displays which may be offensive. (It would be suitable for an article on flag burning, if not an article on flags or the particular country whose flag is being burned).
Consider this guy who has been beheaded. There's easily something disturbing about seeing the guy's head off, no? The guy himself is pretty inoffensive, I think most would say. There is additionally offense at the sociopolitical+etc aspects as well, however.
It's more a matter of when the *display* of the image is offensive rather than what the image itself shows. This would include grossing people out with images of severed heads, the effects of nasty diseases, et cetera, as well as (possibly) the display of images such as that of the penis and clitoris, for possible reasons related to modesty. However, with an article such as Hitler/Kim Jong Il/the KKK, it's reasonable to have pictures of the actual people there. And since I'm dragging in the KKK, I'd say that it would be reasonable to have inline pictures of them in hoods, burning crosses... but we shouldn't have *inline* pictures of any victims all bloody or mangled or anything like that.
General tip: if it involves lots of blood and/or gore, people are liable to be disturbed by the picture itself, not the person who it is of.