The King is an excuse
The King has said he thinks this law should be removed and people should be allowed to criticize him. He's said so, everyone worships him, so why is this law still in place, why do they disobey his request?
The reason they're doing this, is because the coup is going badly, most decisions have been poor ones, and quite simply Thaksin looks like a ****ing hero right now when compared to this lot. There has yet to be a single choice where everyone nods their head and thinks the coup leaders have made the right choice.
Worse, because they had apparent support of the King, they're making the King look bad.
They need a distraction, and this is it, make an attack on YouTube, who can resist an attack on terrorists/child molesters, well at least the Thai equivalent. If anyone complains, just accuse them of not supporting the King!
Why Google goes along with this, well they're just a company now, we're past the idealistic change-the-world stage, they just kicked out a shareholder request that would have been totally aligned with their former position. There's no reason they should elevate Thailand's choices above other countries/non Thai choices. Yet they have.