I think it's probably something like why Ebay won't edit or remove feedback comments: once you edit something at all, you then become responsible for all the rest of the content.

So if LW filtered some of it and then missed a file, they'd be open to being sued.

I wish there were an answer. I sure don't like seeing that stuff either. It's really terribly sad how many people there are out there who download all that kiddie stuff and rape stuff...makes me glad I don't have children.