Yes, it is mind-blowing. I think Pope Benedict did approve the use of prophylactics to prevent disease and pregnancy when nuns were being raped; surely that logic (or some logic!) has to apply for sex slaves; although it seems likely that Cardinal Burke wouldn't think so.
Have you read Christopher Lamb's reporting on this in the Tablet? He reports that the pope communicated his desire that no-one should be terminated as the Knights worked through the problem. The issue turns on whether someone misrepresented the pope's wishes in this matter, and if so, who that someone was. Last week I thought this issue would resolve amicably; now I'm not so sure.