I am hopeful that moderate Islam will soon take a stand against these extremists.
I do not consider Dr. Mohammed or Sheikh Palazzi to be "moderate". They are completely and utterly convinced by the Quran's truth. They do not compromise. The Quran itself just happens to be moderate, so to speak.
It is the others, I think, who compromise. The so-called extremists compromise between what the Quran says and what powerful interests (including Arab nationalism) want. In fact the extremists happily give up the Quran for power.
Yet, I think K. Muhammed's point is that its the cultural baggage that is at issue. I assume by this he means attitudes toward modernity by Muslims.
I'm not sure he (or I) would refer to cultural differences as "modernity" vs. whatever the opposite is.
It's just that different societies face different problems. A Muslim boy in Yemen is less likely to fall in love with a Christian girl than a Muslim boy in Canada. Both would probably need advive from a trained imam, but an imam from Yemen is not likely to have actual experience with mixed couples. Interfaith marriage is not a "modern" thing as such and Islamic law addresses the issue. But the boy will likely want more than just legal advice. He will want to know how to handle Christian holidays.
An imam from Yemen is not likely to know how to advice a Muslim about how to behave during Christmas present shopping.
Irshad Manji points to an article of Dr. Mohammed's about interfaith marriage:
http://www.irshadmanji.com/wp-content/files//Eng_BothPages.pdf
In it Dr. Mohammed argues that a Muslim woman can marry a Christian man, not because it is modern but because the Quran already permitted such a union a long time ago.
How could an imam from Yemen, even if he were actually trained to be an imam, possibly understand the issues faced by a couple living a life he could not even envision for himself? It's impossible.
This case is one of Muslims today and their attitude towards Islam's classical period. A thousand years ago when there were many more Christians living in the Islamic world, the issue was probably as current as it is now for Muslims living in the west. But in "modern" Yemen it is probably not.
An Yemenite imam would have to be very old indeed to have experience with such a situation.