The Associated Press’s “Don’t quote us” policy is worse than I feared.
Not only are they employing DMCA takedown notices against clear cases of Fair Use and requiring payments for quoting as few as five words — their proposed licensing agreement has an anti-disparagement clause:

You shall not use the Content in any manner or context that will be in any way derogatory to the author, the publication from which the Content came, or any person connected with the creation of the Content or depicted in the Content. You agree not to use the Content in any manner or context that will be in any way derogatory to or damaging to the reputation of Publisher, its licensors, or any person connected with the creation of the Content or referenced in the Content [Ö]
Publisher reserves the right to terminate this Agreement at any time if Publisher or its agents finds Your use of the licensed Content to be offensive and/or damaging to Publisherís reputation.

Of course, this is exactly one kind case that Fair Use is intended to protect — criticism of poor reporting.
What’s interesting, and unknown right now, is the degree to which this policy was vetted by the AP’s board, which is made up of newspaper owners. There is no doubt that this policy is bad for AP’s owners, who depend on links (and the quotes that go with them) for a big chunk of their direct traffic, as well as their Google juice.
Personally, I’m observing this policy by posting some AP content to my (other) blog.
Originally published on my blog at JupiterResearch.