Can’t believe I missed this. Seems that McCain promised to never back down from his criticism of Falwell:

Back in 2000, when McCain was asked whether he stood by his description of Falwell, he said, “I must not and will not retract anything that I said in that speech at Virginia Beach. It was carefully crafted, it was carefully thought out.” (Hardball, 3/1/00)

In other words, after promising not to retract his statements, McCain did exactly that and bowed to pressure from the far right.