She didn't handle the question well, and it wasn't a hard one. Here's one possible answer that could have been given:
"Advocating the genocide of any ethnic group is hate speech and incitement, and has no place in civilized discourse. Penn will not permit such hate speech, while still protecting the free speech rights that allow healthy public debate on issues of the day."
What should be allowed is the questioning and critique of any policies of any government or militant group or party. Every group that claims to act for its members must be held accountable.