Then why attack its employees and not the corporation itself?

Officers of the company are the company, legally.

But the cause of Freedom is not best served by holding up "freedom to laugh at retards" as a fundamental right.

Let's not forget that Google is perfectly technologically capable of filtering its content - and we know that because it does it in China.

It's not "freedom to laugh at retards" that's the issue. No one is arguing that Google should have been able to keep the video up (not that there isn't some merit to that argument), just that as long as Google complies with police requests in a timely matter, the company and its employees should not be liable for someone else using their service to post content.

Due to its user submitted content, isn't youtube just banned outright in China?

bail money, maybe? or maybe a personal vendetta by someone?