It's interesting how that one borderline investment seems to have tainted PGs brand of percieved ethical investment. It's risk profile is no longer bounded by the company door, but affects the Ycombinator brand as a whole for future startups.
It's a case of damned if you do, damned if you don't. He could have simply let it go but instead chose to stand up for his investment. This in turn led to a careful parsing of his words and as far as I can see short of divesting or distancing themselves from the investment (which would be unprecedented) still sent a strong message. In for a penny, in for a pound. I am assuming that future YC companies will be looked at a lot better from an ethics perspective and PG's personal and YC's investment involvement with Watsi more than makes up for whatever ethics dent he might have received here.
On a set as large as YC's it should not be surprising there is at least one bad apple either. It's no excuse but it is also not nearly as damning as it could have been, witness that other justfab.com thread for a nice example.
