Firstly, you're talking about free speech as if reddit is the government, and it isn't. reddit is under no obligation to provide you with any sort of platform or tolerate any particular variety of speech, hateful or otherwise.
More importantly, though, /r/fatpeoplehate is toxic speech.
Regardless of what we feel about their motives -- hate collective, reaction to censorship elsewhere, elaborate art project, poor oppressed minority, speaking truth to power, whatever -- it made a critical mass of people profoundly uncomfortable using the platform, and also made the platform distasteful to potential users and advertisers. (How many of you have personal experience with conversations along the lines of "Well, yes, there is a place called Creepshots/FatPeopleHate/TheRedPill, but Reddit is so much more than that...")
With that in mind, in your zeal to promote free speech, you're effectively excluding vast numbers of current and potential users from the platform: people who either feel directly targeted by /r/fatpeoplehate, or who find its existence to be so profoundly discomforting that they simply want nothing to do with the site at all.
It's fine and well to adopt a muscular perspective on free speech -- "If you can't handle the heat, stay out of the kitchen." -- but this puts the platform into an inevitable death spiral. More and more moderate people get turned off by /r/coontown and /r/fatpeoplehate and the rest of it, and they leave. This makes these places an increasingly prominent part of reddit, which makes the platform even more intolerable to moderates. Eventually, all that's left is all-trolling-all-the-time, and a site that users won't join and advertisers won't touch with a ten-foot pole.
In essence, reddit's administrators have decided they don't want to turn into 4chan. And I think that's a fine decision.