I'm fairly sure that I agree with EVERYTHING you've outlined here. I also am of the mind of, while not being a personal fan of the 'bannable' material, not seeing a problem with people who are fans posting it. I think it's ridiculous that LJ is attacking fiction and art. A great deal of art (of any medium) takes many cues from uncomfortable subjects in RL (the movies L.I.E., Happiness, Boys Don't Cry, Irreversible, Trouble Every Day, Kids, Bully and the TV show Carnivale are just examples of this) and it is these that are the most profound and moving.
Boo on LJ for sinking to the level of such blatant and disrespectful censorship.