I'm not sure if I believe it was really blizzard who cancelled it. I wouldn't be surprised if Nintendo cancelled it. They have a lot more to lose by becoming associated with Blizzard's controversy. Especially if there were protests outside their store.
They are genuinely afraid of more media screwups and bad press?
They could control everything internally perfectly - however that won't prevent content from being produced of even one or a few who protest. Externally they can't control who protests outside the event - which will be a source of content for media.