Well it's been threatening us for a long time. Sometimes you need some preventative measures. Or maybe the US military's got a bunch of lunatics. *rimshot*
Really though, there was a lot of crazy grandstanding back then. "Nuking the moon", if it had actually worked as intended, wasn't likely to hurt anyone on Earth pretty much ever. It'd not be enough force to crack or alter the moon's orbit and the fallout would be so far away it would more than likely get pulled back to the moon than reach the earth and contaminate it (check out actual images of how far away the moon is from the earth, it's out there). That said, they were right to pull the plug since they had no idea if the launch would actually be successful, and no idea if the rocket would fall apart on the way to the moon leaving debris orbiting the earth for centuries, making it very difficult to set up satellites in the future.
It sure would have been neat looking though.
"On two occasions, I have been asked [by members of Parliament], 'Pray, Mr. Babbage, if you put into the machine wrong figures, will the right answers come out?' I am not able to rightly apprehend the kind of confusion of ideas that could provoke such a question." ~ Charles Babbage (1791-1871)