First off to the bloggers who are screaming from the left about this, get a grip. I spend a bunch of my free time just surfing to different blogs, and I'm getting the impression that a lot of the bloggers on both sides spent too much time in the "Usenet flame wars" of the past, where they were more anonymous than they are now. Blogs are much more open and widely read, and therefore are going to get reactions you might not be used to getting.
Any blogger (or business for that matter) that is going to accept paid advertising has to understand that there is a relationship between you and the person paying. When you damage it by the content of your blog, you may well have an advertiser pull out. That's what happened at News Blog, plain and simple. In the world of political advertising, that is doubly true, a candidate can't even appear to support someone who does something that controversial.
Scripps Howard News Service has story on the controversy.