There's something fishy about this. If Arab Muslims really could not tolerate pictures of prophets then there wouldn't be an ancient Orthodox church left standing. And there are thousands (though not in Saudi territory - they are true to their word - they demolish churches as well as mosques). And its taken four months to blow up - and the main push has been coming from the unlikely direction of some usually only mildly Islamist Egyptian politicians.
My strong suspicion is that its a pissing contest between different Sunni factions trying to get influence in Palestine and Lebanon now they are in the weird situation of Hamas being elected and the Syrians being booted out of Beirut. The Iraqis are out of the picture, the secularist parties are humiliated, and the Sunnis really, really don't want to lose any more clout to the likes of Hizbollah.
Basically, everyone wants to be seen as the gang boss who can organise the biggest riot. And the most points will go to anyone who can close down a newspaper or an embassy or even better force a "western" government to back down of free speech.
Given that, the correct thing newspapers in free speech countries to do is to publish the pictures for solidarity. They can pick on one small paper, maybe even one small country, but they can't get all of us. And our governments need to stop faffing about with pathetic religious hatred laws and affirm the right of free speech - which is freedom to say bad things
Tit for tat, they should also ignore the tabloids demanding arrests. If we don't send men with guns round to stop a publicity-seeking Danish cartoonist from insulting the Prophet neither should we to stop some loser from Leicester waving "kill the kaffirs" banners around in Trafalgar Square. As long as neither of them actually try to hurt anyone.
And I mean it about not prosecuting them - The whole point is that they are saying we should Do Something about the publishers of nasty cartoons. (For some value of "we" that includes everyone of vaguely European post-Christendom culture from Danish neo-Nazis to pacifist-libertarian Anabaptist feminists in Wisconsin, taking in Margaret Thatcher and the Italian Communist Party on the way) And when we refuse to Do Something because of Free Speech they provoke us by saying other nasty things until we break and prosecute them and they can say "Aha! Your Free Speech doesn't apply to Muslims then!" They want to be prosecuted. It puts them in the right.