Bad judgment all around. The police shouldn't have arrested them but in doing so they are trying to defuse and escalation of the situation. It's legal for any religious group to stand outside another's place of worship or celebration and hand out opposing beliefs, that doesn't make it a good judgment call. I would dare anyone to go stand outside a roman catholic church in New York and hand out Muslim verses. You'll have your arse handed to you in minutes.
I'm not saying they should have been arrested obviously you have religious freedom but the time and place was a poor attempt to incite a reaction, nothing more.
Bad judgment or not, the Constitution grants them the right to hand-out religious material. But shocker, our Constitutionally-mandated rights once again take a back seat to the world's 24/7/365 victims.
But I like your justification of the situation by likening it to a Muslim handing out religious material outside a Church. So, once again, two wrongs make a right. For that matter, there is no indication that a Muslim would have his "arse handed to him" for handing religious pamphlets out. In-fact, I suspect nothing violent would happen (and anti-Islamic crime statistics support that).