This is bad news.
They're going to backtrack on this. The sooner they do it, the better for them politically.
I understand the problems of setting a precedent. And there really is no getting around the fact that the hosts do have the final responsibility for screening travelers (and travelers for screening hosts).
But rightly or wrongly, they're going to end up on the wrong side of this story unless they make things right for this gal and can tell Arrington and other journalists, "we've made sure our customer is whole."
After saying that, they can use this as a learning exercise for their community about how screening hosts and travelers yourself is important.
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[Edit]: Is she in San Francisco? It looks like she is. She called SFPD. This is an easy one. Brian, Joe, or Nathan needs to be out there to provide a shoulder to cry on and an open checkbook to fix anything that money can fix. Nothing in that apartment costs more than the value of the ammunition this is going to give to their enemies.
The earlier they do this, the more quietly they can do it, which serves their purposes as well.
[Edit #2]: Some form of insurance might be a worthwhile addition to their offering, but that's something they can debate and decide on after they put out this fire. [added:] Also, insurance doesn't solve the safety issues involved here, so they're still going to need to emphasize the importance of screening travelers (and hosts) carefully.
[Edit #3]: EJ doesn't sound particularly litigious in her post, but consider what happens if she does decide to sue AirBnB and any part of it makes it to a jury. I mean, HackerNews is lining up against them. Consider what 6-12 normal people might decide. The wise move would be to make sure that she's fully satisfied with the way they treated her.
[Edit #4]: Arrington updated the article after speaking with Brian Chesky. Brian, Joe, Nathan and company did the right thing here, as you would expect.