The problem is, freedom of speech is very much a United States thing, and... well, it's kind of a joke, really. :P And frequently misinterpreted, I think. It isn't a free license to run around yelling the "f" word at the top of your lungs in a grocery store.
Guild Wars is played by people all over the world. And that means there's a lot of people. Some of those people are going to be oversensitive. Some of those people are also not going to know what something means to one person when it means nothing to another. Other people still have all the common sense of a fruitfly in terms of what names they choose.
I don't agree with the level of filtering in some instances, but I understand the reason. ANet's goal is to create an environment that people feel comfortable in, one that people want to have fun in. And because there's so many people from different walks of life, there's an awful lot of potentially offensive content across all of it. I've done geopolitical software scrubs before - it's a pain. :P
I wish there was a way to filter out words without filtering out words that contain them, such as in the commonly used "jewel" one.