They lose credibility and we gain it. What's the problem?
If it weren't for:
Seventeen dead, increased hostility to our troops/those supporting democracy and aiding the terrorist's recruitment with a false story from our press, I'd agree with you.
Note this is taken from a Reuters report on the Newsweek "Dan Rather" style retraction and semi-apology to the victims:
Newsweek said on Sunday the report might not be true.
"We will not be deceived by this," Islamic cleric Mullah Sadullah Abu Aman told Reuters in the northern Afghan province of Badakhshan, referring to the magazine's retraction.
So who are the "victims"?