As a former magazine editor, I can make an educated guess why the folks at Newsweek opted for a celebrity cover rather than a news cover: a better shot at big newstand sales. Celeb covers nearly always sell far more than mere news -- you don't need to sit through the seminars I've endured to figure that one, but the actual differences in sales can be huge. And a foreign news story, in particular, is the kiss of death for newstand sales, regardless of how important the story is.
So the powers-that-be at Newsweek figure that they can attract readers in Europe, Asia and Latin America with a dramatic cover depicting an Islamist armed with an evil-looking rocket-propelled grenade launcher that seems to be aimed right at the reader, who -- it is to be assumed -- would be thus "grabbed" by the prospect of a hard-hitting news story. American readers, on the other hand, are assumed to prefer the soft pap of Newsweek Entertainment. "The audience is stupid" is the prevailing sentiment among the people at the top of the MSM, as Harry Shearer pointed out last week: "Whether or not they actually started out stupid, your programming decisions may help make them stupid." It's a self-fulfilling belief.
Now I believe it was because BushCo comes down hard on anyone not towing the approved propaganda line, but am willing to agree it could be a combination of profits and BushCo pressure.