As despicable as the beliefs of Westboro Baptists are, lots of people believe many strange things and often the best response is to ignore the crazies. However, in this case, much worse than what they believe is the way they go about attempting to spread their message--namely by verbally abusing the families of fallen heroes.
If you haven't had a chance to do so, I would strongly recommend reading Samuel Alito's dissent in the recent Westboro Baptist First Amendment case (Snyder v. Phelps). Alito was the lone dissenter in an 8-1 Supreme Court decision that ruled in favor of Westboro Baptist's right to verbally abuse the family of Matthew Snyder--a soldier who died serving in Iraq--at the site of his funeral. The issue, by the way, wasn't whether the Phelps gang should be arrested and jailed, but whether Snyder's family, after receiving the verbal abuse, could sue Westboro Baptist for the injurious comments they had made and seek restitution. Though I agree with David Bentley Hart's observation that "in the 1780s, any rabble behaving as the Westboro people do would have been arrested, incarcerated, and fined and no one would have thought this an abridgement of their chartered rights" [emphasis added].
I think a lot of people conceive of the 'Freedom of Speech' as being something that is almost absolute. We may be vaguely aware of types of speech that aren't protected--slander, libel, yelling "fire!" in a crowded theater--but aside from that we tend to think that anyone can say anything anywhere, and the First Amendment protects that right. And while the precedents in the courts may affirm this very broad interpretation, that doesn't mean it's the best one, or that it was always interpreted this way. In fact Hadley Arkes argues convincingly against the broad interpretation, and notes that its origin is only about 40 years old.
Switching gears, I'd like to end with a moral footnote, putting aside the issue of legality for a moment. Not that any civilized person needs to be convinced that Westboro's actions are revolting, but I thought that Christopher Benson had an insightful comment (which appeared in a piece on a different subject) on the precise reason why their actions are so vile and repugnant:
No living person has undergone the descent of Christ into hell, and therefore we must never count who is there. What makes the hell-counters of Westboro Baptist Church so odious is that they feign the Cross’ knowledge without undergoing the Cross’ torture.