So first Associated Press tells a liberal site that they can't quote some 2 dozen words from a release and then they back off on it and say that they're rethinking their policy.
Not surprisingly, some website reacted harshly, saying that they're not going to use any AP material at all (i.e. Techcrunch) while Daily Kos took the opposite tact, saying that they'll quote as they please from AP, no matter what they say.
As you read through the articles, particularly the Times article at the beginning of this post, you see that not only had AP made a bone-headed, short-sighted move but that they also probably don't even have the law on their side. Like record companies, they're confused by the digital age and don't know how to handle appropriation of their material so they over-reacted.
I've quoted AP material before and will continue to do so in the future though I do like to make a point to link to them and not to over-quote. They're a great and valuable resources but again, going back to the label comparison, they need to be smarter about how to protect their material while also keeping their service alive- they've even been compared to Metallica (not musically of course but in terms of short-sighted net policy).