I think the first question is trivial. A question meant to incite and inflame without any true intellectual purpose. The fact that Hitchens brings up the 20s and 30s in a lopsided fashion lays bare his cowardly, malicious intent. Distortions of the relationship between the Vatican and the evil regimes of that era are frequent and shameful.
The Church maintains their current and recent presence in even the most horrible of situations so that it can maintain its ministry to Catholics in those countries. Its not like the Vatican is selling WMDs to Saddam like the USA in the 80s. Also, as a sovereign nation, the Vatican should have a foreign policy, based on Benedict XVI's writings and speeches this foreign policy has a lot to do with advancing human rights and dignity (Hitchens never mentions what he met with Muslims about - namely cooperating in alleviating human suffering).
The Bernard Law question is much more poignant, and an article focused on that alone could maintain its merit. Law should, by most accounts, be exiled or in jail, not in a prestigious job in Rome. However, the theme of forgiveness is a major element in Catholic Christianity. Not only does Christ forgive us, but the Scriptures call on us to forgive our brothers on several occasions. So, theoretically, Law probably asked for forgiveness, just as I do in the Confessional, and received forgiveness. Unfortunately, Penance is also supposed to be a part of that, and it seems Law's Penance does not fit the crime (the decade of the Rosary that I usually get just doesn’t seem to fit here). This may seem unfair to us on earth, but I am confident that Law's punishment in the afterlife will fit his crimes. It is better to have a millstone round one's neck and cast into the sea than injure a child. Also, remember – Judge not, lest ye be judged yourself.