Regardless of what Materazzi said, Zidane was dumb to react. I can totally understand that in a game of that size and stress, you can lose your composure very easily, especially if someone says something as offensive as Zidane claims Materazzi said. But people wind others up in football all the time, it is a tactic to make people lose it and possibly get them sent off. It's obviously not right, but if there is an opposition player who is short tempered or has been known to lash out in the past, people often target them and try to wind them up, by committing little niggling fouls, kicks and saying stuff to wind them up.

The reason Zidane was dumb, was that lashing out at Materazzi was probably what Materazzi wanted, so reacting like that is just a good thing from Italy's point of view.

Yeah, if what was said IS as bad as the press is saying (especially if it involves racism) then Materazzi was out of order and should be punished, assuming they have any evidence. Like splash said, everyone, including people on TV (at least in England) seem to be talking about the 'terrorist whore' thing like it's an absolute truth.