I was asked to make clear my reasons for why Dilaton should continue to be a moderator, so here goes.
Dilaton did a mistake, thinking that it's right. He edited out the posts, because he thought that it's fine to edit out "insults" from posts. Had he knowingly violated the principle of community moderation, or user rights, I would have agree with stepping him down. In fact, I suspect that he didn't even hear of the "user rights" document - to be fair, that was discussed by just Ron and I (Ron proposed it, I modified it and made it official, without consulting anyone). In fact, I just found, that he had once said, in public, a long time ago, when asked by an SE moderator, that "of course insults will get edited out, but it's just that people won't be banned for saying rude things". Now if that isn't a testimony to his innocence (in terms of intention, not action), then I don't know what is.
Probably all of us (us, meaning those who've been active moderators since a long time) have made such a mistake unknowingly in the past. Ron overruled a community moderation decision, I too would have done something stupid if I look back far enough. In fact, I have. In the early days of PhysicsOverflow (when private beta was just over), I had just assumed that an anonymous poster accidentally posted it anonymously because he could not login to his account, and assigned it to his account. Luckily, it was indeed the case, so there wasn't a problem, but there could have been.