I've said it before, I'll say it again
If you disagree with wat twitter tell me a solution that can prevent further escalation.
The fact is there aren't any. Wat Twitter was pretty much the best option they had. All other options are either insufficient, like the labels on Twitter and Facebook, or require government intervention, which Twitter does not have the authority to do.
Will this set a bad precedent? Possible. I just hope that the government will step in soon and make sure that Twitter does not abuse that power and that Twitter and other social media have no reason to use it anymore.