The main subject is the Greek roots—as in Socrates, who he quotes—of Catholic thought.  Reason is the basis of human understanding and behavior, it is not just a matter of faith.  The dialogue between the Emperor and the Persian highlights this theme.   God is comprehensible to us, and God rejects violence as a basis for spreading religion.  Benedict quotes the Koran to the effect that compulsion in the service of religion is not legitimate, even as he insists that Mohammed later endorsed the use of jihad. ~Michael Ledeen

Actually, the subject is not really the Greek roots of Catholic or even more broadly Christian thought (though it presupposes such roots) but the rationality of God–and thus the unacceptability of having recourse to bloodshed and force in matters of faith–which Pope Benedict argues is not simply a Greek idea but a true statement about the nature of God which Muslims do not accept.  The speech did not say that “reason is the basis” for human understanding and behaviour, or at least not in such crude terms, but that faith is rational and any kind of violent faith that contradicts God’s basic rationality must also be untrue.  It seems to me that Pope Benedict quoted the Qur’anic citation “there is no compulsion in religion”–from an early phase of Muhammad’s career–as a way of anticipating and cancelling out this most standard of misleading rebuttals.  As he said:

In the seventh conversation (”diálesis” — controversy) edited by professor Khoury, the emperor touches on the theme of the jihad (holy war). The emperor must have known that sura 2:256 reads: “There is no compulsion in religion.” It is one of the suras of the early period, when Mohammed was still powerless and under [threat]. But naturally the emperor also knew the instructions, developed later and recorded in the Koran, concerning holy war. 

If my reading is right, Pope Benedict was being very clear that he views the verse “there is no compulsion in religion” as one conditioned by the early stages of Muhammad’s career, when it was advantageous to him and his early followers to preach toleration.  When the shoe was on the other foot, and the whip was in the other hand, attitudes towards violence and coercion shift.  He does not say this explicitly in the speech, but you do get the sense that he wants to show that this earlier verse–cited by every apologist and excuse-maker out there–has limited significance for understanding the Islamic conception of God, which he is using as a foil for fleshing out the Christian understanding of God’s rationality.  In other words, I think Pope Benedict effectively neutralises and dismisses this claim of a lack of compulsion in Islam and juxtaposes it with Islamic warfare and jihad to emphasise the disjunction between the two.  It does not really concede that Islam regards compulsion as illegitimate, as Ledeen claims, but that it was considered illegitimate when it served Muhammad’s turn; later, it could be and was used, as was the sword.  Those who don’t believe it can refer to the story of the martyrs of Gaza.  Obviously, if such compulsion and violence had not ever been used, there would have been little occasion for Manuel II to bring it up in a dialogue.     

Of course, the main point of the example from the dialogue was to emphasise the importance of understanding God as rational–a man who believes God is rational should not deliberately act against reason in the belief that he is thereby serving God; a man who thinks of God as capricious, arbitrary, bound by nothing, in essence merely despotic, is not bound by any such constraint, as there is nothing in God’s own nature that demands the rationality of faith.  There is merely obedience to a divine will, which, as the citations claim, can change if Allah so chooses.  All this had nothing immediately to do with the “comprehensibility” of God, as Ledeen suggests, which is technically a distinct question and one complicated by the matter of God’s infinity and the poverty of language and concepts to describe Him, but with God being rational and indeed being Reason Himself.