I actually just looked at this image now, and I must say it's not really nearly as gruesome as I had expected. It's a fairly small and grainy photo, and a minimum of blood or gore is visible. It's disturbing in a conceptual sense primarily, in that the executioner is triumphantly holding up the head as a trophy. I'd say as far as potentially offensive photos go, this is far less graphic than a lot of what we have on Wikipedia. I had assumed otherwise simply because I hadn't actually looked at the image; as it stands now I'm not sure it shouldn't go inline, unless we adopt a fairly low threshold for offensiveness.
-Mark