An excellent opinion piece from the Washington Post on Mahathir's speech and its reception -- Return to Wannsee (washingtonpost.com). He says:

....But what ails part of the Islamic, especially Arab, world, is both anti-Semitism, which is rampant and state-tolerated, and the sort of thinking that underlies it. The belief that Jews have some sort of mystical powers -- that they are smarter and, of course, more diabolical than others -- provides the Islamic world with a handy explanation of why more than 1 billion Muslims cannot seem to cope with little Israel. But what corrupts and enfeebles large parts of the Islamic world is not Jews in either New York or Tel Aviv but its own self-serving and inept leadership -- in other words, some of the very people who stood and cheered the speech.

Sadly, throughout the Islamic world, anti-Zionism has been corrupted into anti-Semitism. Saudi clerics preach that Jews use the blood of non-Jewish children to make their Passover matzos. That classic forgery, the "Protocols of the Elders of Zion," can be found throughout the Arab world. The tenets of traditional European anti-Semitism have been adopted in the Islamic world -- the globalization of crackpot conspiracy theories. Governments either look the other way or offer support.