In certain cultures (and not just Arab ones) it is a sign of respect that one does not show the sole of one's foot or shoe to another person. Doing so would signal that you consider that person of being beneath you. Throwing a shoe is about as high up as an insult as it gets. This is analogous in the US to walking up to a man's wife, lady or whatnot and punching her in the face. Things escalating to killing is expected. You know there's going to be retribution, so that's part of the message you are sending. "I am insulting you, fully knowing what the consequences will be and I accept them as a worthwhile price of doing this."
Shooting someone for throwing a shoe at Mr. Bush is the expected outcome in Iraq, not the amusing "I wish they would do this to him" wishful thinking. If the guy gets out of jail in better health than barely alive, it's a clear message from the Iraqi government does not support us. If he has a tragic accident in a few days/weeks/whatever, it's a clear message that the Iraqi government supports us.