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I don't think Google should be doing this, but this creates a huge business opportunity. When eBay had a similar policy on firearms and firearm accessories it opened the door for GunBroker.com to take that entire business for itself. When PayPal started blocking any transactions having to do with firearms it opened the way for GunPal (which was admittedly a failure for reasons I don't understand - their site has an expired security certificate and I don't think they have been a going concern for 2 years now). That being said, there is now a better market for someone to provide both an integrated search portal and payment option for firearms transactions in the United States.

Just for the Californians and others outside the U.S., yes these sorts of firearm and accessory transactions are totally legal when conducted intra-state or when sent through a licensed dealer. The internet market for firearms is very important due to the incredible diversity in the marketplace compared to the very specific taste of the individual consumers.

As a European, I don't really see what the fuss is all about. I acknowledge that there's the Second Amendment, but articles like these sound a bit as if people were offended if there are shops that refuse to sell firearms or, like in this case, websites/companies that refuse to meddle in these affairs. A bit like being upset that the vegetarian restaurant won't sell you beef...
I am not certain whether or not I agree with your conclusion (nor do I feel like my personal opinion would be relevant right now anyway), but I will point out a few details about this situation based on your argument and analogy:

1) many people feel the situation of Google Shopping refusing to list firearms is actually closer in analogy to "a steak restaurant refusing to allow vegetarians into their restaurant" than your example of "a vegetarian restaurant refusing to sell you a steak" and:

2) that the implication from Google is that these activities are illegal (hence their claim that they did this to "comply with local laws and regulations"), when many people believe that not only is this activity legal, but is explicitly protected by the United State's constitution.

This article then goes to point out that the various "key players" believe this comes off more as a political statement than a business decision. The comments on the second page (which many may have missed) are also somewhat interesting, bringing up previous situations that paint Google's position in a less consistent light.

With that all said, I will now draw a different form of analogy, to see whether the same argument dismissal still works: let's say that Google Shopping decided it would no longer sell yamikas, or if Google Maps decided that you couldn't have a sponsored listing for a mosque, or if Google AdWords decided it would not allow advertisements targeted against pending legislation to ban gay marriage rights.

In any of these situations, I am fairly certain that we would see tons of upset people claiming the exact same issues: that Google was attempting to use their market position in a politically motivated way, and that they should not be allowed to discriminate. This side would feel that entities with as much centralized power as Google cause an unfair power balance against individuals and minorities.

At the same time, we would see people arguing that, while they personally disagree strongly with the actions of Google, they feel that government should not be able to mandate what individual actors do, and that if you want to do any of these things you should go make your own website; some would even say "this is a perfect opportunity for an alternative Jewish/Islamic/LGBTQ-friendly service provider".

To me, this is a fascinating and complex argument, where neither side is in any way obviously wrong; while at the end of the day we need to make practical decisions in specific circumstances as we all live in the same seemingly-objective reality, we really shouldn't be so quick to dismiss other peoples' positions (and this applies even if the underlying position of one side of an argument seems morally reprehensible to us: it is often the case that the person we are judging feels the same about us).

"that the implication from Google is that these activities are illegal"

Google does operate outside of the US, so I don't know why everyone is so quick to assume that they're doing this to comply with some US law.

If Google used the same operating policies in all countries that apply to every individual country in which they operate, then the number of things that would either not be listed or be heavily discriminated against would be enormous, and would certainly include things that would cause more than a few people to be fairly angry due to feeling discriminated against.
In the situations you listed many of them are protected classes of items related to race/creed/ or religion. I would say that it would be more akin to Google saying that they will no longer take advertisement from people / companies offering abortion services. In which case they would see a similar outcry from a different group of people.
Anything that pushes back against the insane gun lobby is great. Let them build their own sites, the more insular and backward they appear the better.
Great for what? The US has the largest population of private gun owners, and it has a far bigger problem with hamburger-related deaths and car-related injuries than gun-related crime. This just seems like a political or CYA move for Google.
I'm a member of the insane gun lobby, and I'd be happy to take you shooting anytime you'd like. I think even if you are against the political stance of the American gun lobby or dislike firearms it's a good skill to be able to safely render a weapon into a harmless condition.