It's interesting watching the reaction to the Pope quoting another one. Reading what the Pope said is does not seem particularly inflammatory. The central point was about if faith should be forced by the sword. However as we have seen before you can open a can of worms if you* even associate Muhammad with anything negative. It is curious though I don't hear as much condemnation when others associate their actions with Muhammad. However that could just be it doesn't get as much media attention.
But here's the rub. You can't have a dialogue between people if one side will get offended and demand you retract a statement before continuing. Causing offence (either deliberately or un-wittingly) is part of the process of debate. Without it both parties would simply be reduced to stating a series of uncontroversial statements at each other before going home for a nice quiet cup of tea.
If you really believe that what the Pope was wrong then engage. "The Pope is wrong because...." is something I've been known to say on occasion. It will achieve more than demanding an apology and shutting down your embassies. I think the outrage and isolationism being demonstrated at the moment is doing more to engender the sense of Islamaphopia and prejudice in the Western world than any Papal statement. It plays directly into the hands of the racists and bigots if anyone who wants to discuss Islam is accused of being one.
*By you I suspect I mean non-Islamic/secular Western commentators