The Mail, Telegraph and Express all back tracked from the original story, stating that no-one is being exhumed and no-one asked for anyone to be exhumed. The leader of the Atheist Community has yet to comment. Mr Kahn has turned out to be "top Banker" as well as a Muslim.
Where did the exhumation story come from in the first place? The original news item, removed by the local paper after the council published it's rebuttal, but still available on various anti-Muslim hate-sites, was substantially about the hedge. "Council asks to buy back part of gypsy grave plot to grow hedge on; gypsies say no." would probably not have made national news. The Smiths refused to allow the hedge because they didn't think it would make a difference, since Mr Kahn and Mr Smith would still be side-by-side six feet underground. This suggests that they hadn't understood that it was a religious requirement and felt they were being singled out for personal animosity because they were gypsies. ("They want to push us away and hide us.") This happens quite a bit in religious news stories. Cultural protestants just don't get that rules and laws about eating and washing and burying people are a big part of Jew's and Muslim's religion. ("It isn't antisemitic to say that Jewish children have got to eat bacon on Tuesdays or not have any lunch at all, after all, pork is much the same as any other kind of meat. I suppose Christians can say that they don't like sprouts because it's part of their religion, can they?")
When a journalist is dealing with dry, abstract issues, he very often tries to come up with a punchy opening sentence that gives a concrete example of the kind of thing he is talking about. "School kids will be sitting in detention doing extra Latin prep if Tory MP Bufton Tufton has his way..." reads better than "A Member of Parliament today remarked that modern schools should emulate the curriculum and disciplinary practices of his youth." "A Romany family are afraid they might have to exhume a recently buried relative..." might have been a fair, if overheated, opening sentence. But "Romany family face having to..." is how these things come out after being passed through the Quick Quotes Quill. The Smith family are indeed quoted as saying "We don't want any of the bodies exhuming but it looks like that is what might happen": there is no claim that anyone has directly said that this might happen. (Some people might wonder if the reporter got that quote by asking something along the lines of "What would would you say IF they said you had to dig him up".)
The opening remark was arguably a fair spin on the story: a little over dramatic, but that's what journalism is about. How could the Hinckley Times possibly have known that the national papers would read the first sentence and treat that as the whole story? And how could those national papers possibly have guessed that racists would take them at their word and report the exhumation as if it had already taken place.
And there is nothing that can be done. "Muslims are always digging up dead Christians" is now another of those things that "everybody knows".