Insult a black man, it's racism.
Insult a Jew, it's Anti Semitism
Insult a gay guy, its homophobia
Insult a Muslim, its freedom of speech
...and that's really all there is to this debate.
The hypocrisy is truly astounding.
I think it's more confused, nuanced and/or more blatant than that:
Fermenting violence or discrimination against ethnic minorities is racism. Simply insulting someone of a different ethnicity is not racism, in the legal sense, but it might be caused by racism. But then 'racism' is not illegal. What is illegal is discrimination or violence caused by racism.
Unfortunately, anti-Semitism has become synonymous with criticism of Israel and Judaism.
One is free to campaign against homosexuality, transgender, etc and some religions and non-religious people do so freely.
One can insult another individual without it being racism or islamophobia. Like racism and xenophobia, islamophobia is not illegal. It is considered freedom of expression. It is only the fermenting of violence or acting discriminately due to religious or ethnic differences that is illegal.
Of course any intelligent people recognises that consistent racism, xenophobia, islamophobia, anti-Semitism, if allowed to be expressed freely and without constraint, it becomes the norm in society and unfortunately acceptable among the un-intelligentsia, leading to further expressions of hatred and treatment based on cultural, religious or ethnic differences.
In the case of the Satanic Verses and Salman Rushdie, I think it was a) a knee-jerk reaction to public outcry fermented by extremists, who had probably not read it, and failed to understand it, b) it was a reaction to a hysterical outcry, by those who had not even read it, but c) it actually reduced the public outcry and hostility because it was an 'official' reaction, although not the desired official reaction.
UK has experienced similar public outcries from loud critics of Islam, e.g. Tommy Robinson. Fortunately, or unfortunately, depending on your viewpoint, Tommy Robinson overstepped the line in other more easily identifiable legal limits.
Another public outcry whipped up by some is that against refugees, asylum seekers, etc. But xenophobia and racism in itself is not illegal, and if those creating the hatred against such a group do not ferment violence, they remain within the law, even if they do resort to urban mythology and blatant untruths in demonising that group.