Excellent job by AmSpec’s Philip Klein to nail this. The smear originated with an AP story that quoted Giuliani as saying:

“This is the world we live in. It’s not this happy, romantic-like world where we’ll negotiate with this one, or we’ll negotiate with that one and there will be no preconditions, and we’ll invite (Iranian President Mahmoud) Ahmadinejad to the White House, we’ll invite Osama (bin Laden) to the White House,” Giuliani said.

“Hillary and Obama are kind of debating whether to invite them to the inauguration or the inaugural ball,” he added.

Minor problem: he didn’t say “Osama,” as you’re about to see. That didn’t deter Krazy and Huffy, though, who proceeded to use the misquote as a jumping-off point for some red-meat nutrootsery — right after they’d played the videotape showing what he actually said. And so we return to the eternal, unanswerable Olby exit question: Did he do it on purpose or is he really just this stupid? Or does he just have a problem with, ahem, “foreign” names?

It’s in three segments — the opening credits teaser, the teaser at the end of the previous block, and then the interview, just so you can see for yourself how many times he pimped the phony Osama angle. This was from Tuesday night’s show; if there was a correction issued tonight, the Olby Watch guys didn’t notice. Although they did notice Kayo’s silence about the guilty plea in that Fort Dix plot which, he assured us, was little more than a “dubious fantasy.”

Update: This sort of thing is par for the course at HuffPo lately.

Update: The AP finally got around to correcting the original story. Two days later.