On the one hand you have a ridiculous story about how scanning public domain books to make the knowledge easier for everyone to share is somehow detremental to kids. But if you look at the facts, it falls apart even more.
1. Only 4% of books make any money at all, and we're talking about one story. Should laws be written to cover the very few?
2. The story Peter Pan isn't even in the Google Print index, according to friends working at Google.
3. Publishers can opt-out of the program, so the children could live another day if the hospital wanted out.
4. How exactly does searching for a book take money out of a publishers pocket again? Would people really not read a book and instead click through Google page by page by hundreds of pages to read it? Do people read search results instead of reading websites? Seems to me like it'd spur on sales, not steal from them.