The problem has been the recent case law following SWMNBN debacle which has rendered websites a mystery as far as this goes and it seems it is still quite mysterious even after this paper.
Defamation is, I think the publishing of a defamatory statement which refers to the claimant and has no lawful justification- it has to be proven that it is published, that it is defamatory (this one is bizarre, almost anything can be construed as defamatory) and that it refers to the person who is claiming- again, this is a bit of an odd one as you can infer this, still be liable if it's about someone else, and can also affect whole groups of people
. The law as it currently is is in two forms really, libel, which is where it is in permanent form ie written, published, even a film- and slander which is transiroty in form- there's also a whole heap of new cases on European law creating what has almost become a 'privacy' law in the UK.
Defences have always been justification, fair comment, absolute and qualified privelege, that it was unintentional, innocent dissemination eg where someone prints a defamatory remark repeatedly without realising, and volenti or consent, so where someone invites it basically. There has never been a provision for humour- which is where the law is ridiculous at present.
Re: web hosts, the recent cases have been really peculiar imo. Ordinarily the party that publishes the remark is deemed liable- if this could be an internet site then the site is liable (though this is arguably historically not really so if they have removed the remark as soon as they are aware of it). The SWMNBN case is obviously a case where MN were held liable for a remark on their website.
However there have been a few cases including a svcary one in the High Court, Sheffield Wednesday v Hargreaves, in which the website.chat forum was ORDERED to provide the identities of the users (ie, you, you, you, me, AnyFucker, Cod, and so on) who could then themselves be sued by the claimant. This is not only scary for you and me but it provides problems for MN as well- how do they know who you are? How do they know something is defamatory? blablabla
Basically the real need for reform is, well, all of the law, but in particular the defences of fair comment- and also there really has to be an addition for a comedy defence, many things are said for the humour and are clearly not meant as defamatory statements of fact (eg SWMNBN)