What is wrong here is how public museums and public academia function. They get to drink public money, but people who are not accountable to the general public in any way control content.
Quite right. If this were a private gallery and those who pay for its operation (customers) were outraged, the owner(s) of the gallery would pull the "art" rather than risk losing customers.
With taxpayers footing the bill, the "art" can outrage 50-70% of the people who pay for its operation, but getting the "art" pulled will be next to impossible, and getting the director booted would require a massive, coordinated public effort.
Perhaps someone with the requisite skills could duplicate the work, except depict Muhammad rather than Jesus, affix the "artists" name to the piece, and circulate it in the Middle East. Put a bio of the "artist" on it as well, with his address so people can order prints.