Why is this offensive?

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   There is a story in the news today about a British schoolteacher in Sudan who was arrested for letting her schoolchildren name their class teddy bear Muhammad.  20 out of 23 students picked this as their favorite name.  Yet when the parents found out, they complained and the teacher was arrested.  I don't want to offend anyone myself by asking about this, but I just don't understand.
Here's the story:
http://www.msnbc.msn.com/id/21973378/?GT1=10547
Sudan arrests teacher over 'Mohammed' bear
Briton allowed her class of 7-year-olds to choose teddy bear's name

updated 5:15 a.m. PT, Mon., Nov. 26, 2007 KHARTOUM, Sudan - A British primary school teacher has been arrested in Sudan, accused of insulting Islam's Prophet by letting her class of 7-year-olds name a teddy bear Muhammad, her school said on Monday.
Colleagues of Gillian Gibbons told Reuters they feared for her safety after receiving reports that young men had already started gathering outside the Khartoum police station where the Liverpool woman was being held.
Teachers at Unity High School in central Khartoum said Gibbons, 54, made an innocent mistake and simply let her pupils choose their favorite name for the toy as part of a school project.
Police arrested Gibbons on Sunday at her home inside the school premises, said Unity director Robert Boulos, after a number of parents made a complaint to Sudan's Ministry of Education.
Boulos said she had since been charged with "blasphemy," an offense he said was punishable with up to three months in prison and a fine.
A spokesman from the British Embassy in Khartoum said it was still unclear whether Gibbons had been formerly charged. "We are following it up with the authorities and trying to meet her in person," he said.
Boulos said he had decided to close down the school until January for fear of reprisals in Sudan's predominantly Muslim capital. "This is a very sensitive issue."
"We are very worried about her safety," he added. "This was a completely innocent mistake. Miss Gibbons would have never wanted to insult Islam."
Class voted on toy name
Boulos said Gibbons was following a British National Curriculum course designed to teach young pupils about animals and their habitats. This year's animal was the bear.
Gibbons, who joined Unity in August, asked a girl to bring in her teddy bear to help the second grade class focus, said Boulos.
The teacher then asked the class to name the toy. "They came up with eight names including Abdullah, Hassan and Mohammed. Then she explained what it meant to vote and asked them to choose the name." Twenty out of the 23 children chose Muhammad.
Each child was allowed to take the bear home at weekends and asked to write a diary about what they did with the toy. Each entry was collected in a book with a picture of the bear on the cover, next to the message "My name is Muhammad," said Boulos.
The bear itself was not marked or labeled with the name in any way, he added, saying Sudanese police had now seized the book and had asked to interview the 7-year-old girl.
Boulos said the first he knew about the course was last week when he got a phone call from the Ministry of Education, saying a number of Muslim parents had made formal complaints.
One Muslim teacher at Unity, who also has a child in Gibbons' class, said she had not found the project offensive.
"I had no problem with it at all," the teacher said. "I know Gillian and she would never have meant it as an insult. I was just impressed that she got them to vote."
The country's state-controlled Sudanese Media Centre reported late Sunday that Gibbons had been arrested for "insulting the Prophet Muhammad." It said charges were being prepared "under article 125 of the criminal law" which covers insults against faith and religion.
No one was immediately available for comment from Sudan's ministries of Education or Justice.
Unity, an independent school founded in 1902, is governed by a board representing major Christian denominations in Sudan, but teaches both Christians and Muslims aged 4 to 18.

Edited by Chelle