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Of course employers should be able to use such criteria for firing anyone under their employment. Hiring would be a different matter, in my opinion, than firing a person based on any kind of web presence.
As one goes through life, he or she makes choices. Every day, all day, we make choices that effect the way others see us. If you are on YouTube drinking, doing drugs, beating midgets or having oral sex with monkeys, someone is going to have an opinion about it. They don't have the right you say? Then maybe we shouldn't have the right post it. Someone running a Law firm wouldn't want Tracy Lords representing them in court, so why would they hire her? Plus if I was caught on the web doing any of those things, I would be more worried about my friends and family seeing it rather than some anonymous, potential employer. We're all supposed to be adults, maybe we should act like them or suffer the consequences.
On the firing side - if your boss sees you in public making an ass of yourself, does he or she have the right to fire you? Probably depends on where you live, but if they can't, they should be able to. When you work for someone, you should represent that place in a manner that wouldn't cause that company embarrassment. One would think that in this day and age, of supposed enlightenment that people could carry themselves with some form of dignity. I would expect that of any employee I would hire.

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