So this item is still running hot, with some great posts around on the subject.
Let me take advantage of their distillations to summarise a few key points, and point you to some of the best analyses of the issues:
L'Osservatore Romano's unethical role in the affair
Jimmy Akin points out that the Vatican newspaper seems to have deliberately broken a press embargo, provided a misleading cut of what the book said, provided no context, and perpetuated a mistranslation (the Pope was talking about a male homosexual prostitute using a condom, a situation where no contraception is involved). Canonist Ed Peters has nice take on this angle too.
***Fr Finigan explains that the newspapers action may have had a political-theological motivation in an ongoing debate within the Church. If you are going to read one article on all of this, read this useful analysis of just what the theological issues actually are.
The impact on the Church's official position.
The Pope was speaking as a theologian, not as Pope. We are free to disagree with him. Fr Finigan gives a great analysis of the levels of authority that are applicable.
What did the Pope really say?
Well read for yourself, Chiesa has all of the pre-release extracts in full (and there is a lot of more interest than condoms!) as well as some interesting contextual information.
Suffice it to say he gave an example where condoms might be a positive step in very limited circumstances that don't relate to the possibility of contraception.
Should he have said it?
As I read it, the consensus is that what the Pope actually said is perfectly in line with past teaching.
The problem is that a nicely nuanced comment that would be fine shared among theologians tends to have a quite different impact in the world media. Fr Finigan (amongst many others) therefore suggests it might have been a less than prudent example to use.
However, there are an interesting range of views on this. I have to say that when I first heard the news item, I wondered if the leak was a rather hamfisted attempt to soften the Pope's image. Prima of Gregorian Rite Catholic sees it as a measure of his laudable desire to promote the conversion of sinners. Damian Thompson interprets the issue as one more item for the critique of the Pope from pro-JPII conservatives.
There is a lot more around of course...