That sounds like it was able to provide a pretty sensible assessment of its own limitations.

I think this sounds like a pretty good implementation of guide rails. Obviously it's a little jarring to ask for a joke about one group and get a very bland-but-inoffensive joke, and then ask for a joke about another group and hear something like 'Error: my heuristics indicate low confidence in my ability to provide a joke about that group without saying something that would be considered offensive.'

But that's better than having it give an offensive joke. And I think it's concern is valid. If it's learned humor from the internet, jokes about Muslims are far more likely to be unintentionally offensive. I hope it learns to tell jokes better, but until then this I think this more of a sign of success than failure.