I think I mostly agree with you.
One of the key things about social media, is that while they can provide a very cheap, very effective communications channel, that channel penetration (must resist temptation to come over all Frankie Howerd at this point) is low. Increasing, but low.
I would suggest councils should use these methods to engage, as much to listen to what others are saying about them as anything else.
However, Plymouth’s stance is slightly different. They’ve simply prohibited use of twitter from Council networks except for the Comms team. This isn’t switching off any ‘official’ twitter use, it’s simply preventing staff (and/or members – am less clear on that issue) from accessing twitter from their PCs in work time. Which is fine. As you say, that’s entirely up to them what to allow.
However, it does little to relieve the problem (“people speaking inappropriately”) simply because there are so many ways to update twitter – txt message and iphone sorts of updates will still be okay, even if all of the twitter API routes have been closed down – and it’s not clear they have, since the communication specifically refers to the twitter site (although that may well include APIs)
Therefore while I would say it’s up to Plymouth to determine what constitutes appropriate employee usage of their resources, the action they have taken is not likely to do much to alleviate the problem they had – plus it’s netted them a lot of publicity (probably more con than pro).