From the App Store Review Guidelines: 14.1 Any app that is defamatory, offensive, mean-spirited, or likely to place the targeted individual or group in harms way will be rejected 19.1 Apps containing references or commentary about a religious, cultural or ethnic group that are defamatory, offensive, mean-spirited or likely to expose the targeted group to harm or violence will be rejected Also "We have lots of kids do…
I guess they did follow the rules, as it was just after Israel sent a demand for the app to be pulled from the market that it got pulled. That to me says that it was approved by apple... OTOH it could've slipped passed the review board