Echidne of the Snakes has a fine meditation on the problems with tolerance as a concept.
I am not sure I could say anything smarter or more interesting than she has, but I will offer up a bit of my own analysis of the concept of tolerance.
A few years ago I challenged my students to take tolerance seriously as a concept. I was witnessing wacky folks use this concept to push their questionable hypotheses, practices, and policies. In particular, I was concerned with the religious right's determination to infiltrate school boards in order to bully well-meaning folks to be "open-minded" and teach Intelligent Design (aka Creationsim).
I was bothered at the perversion, to my mind, of the spirit of tolerance. Telling people they are intolerant if they don't agree with your views is a rather disengenuous method of getting your way. I was watching the folks, who have no real desire to sincerely challenge their own axioms, redefine the word tolerance to mean relativism. The uber-social conservatives like Rick Santorum might appear to hate post-modernism, but this is all a pose. They actually utilize, regularly, the droll aspects of post-modernism--namely, its radical relativism ("truth" is a mere discourse disseminated by those with cultural power)--to get their own way.
Moreover, they are willing to open up a can of whoop-ass on anyone who dares question the rigor and reliability of their positions: "How dare you impose your snooty elitist views on us!" or "So much for open-mindedness!" This move is likely to silence many, many people who simply want us all to just get along.
So maybe "tolerance" is just a bad ideal. I was unable to persuade my students that tolerance meant that we should have the guts to challenge the positions of those whose beliefs we find problematic. My argument was that challenging someone's belief demonstrated that you took that person seriously. I used the analogy of marking up their papers with lots of comments: if I write that much I am taking your views seriously. If I don't respect you then I might as well humor your looney ideas but in no way really believe myself obligated to listen to you or challenge my own positions.
Like I said, the students didn't buy it. For them tolerance meant that you sort of "put up" with someone you didn't like, you know, like your annoying great-Aunt who spouts utter nonsense and lives with 8 cats. My students taught me that most people understand tolerance to mean being polite. Perhaps, it's a WASPy sort of relic. Don't ruffle feathers, just smile and pass the yams.
If in fact we cannot rehabilitate tolerance to mean something like taking seriously other people's views--even if that means disagreeing with them or pointing out the problems with their way of thinking--then we should think long and hard about whether or not it is worth preserving.
We might be better served by a more robust notion than tolerance. I am not sure what we would call it, but it should denote a commitment to challenging our views when they are not the product of serious deliberation, but rather inheritance from our family and folkways. It should also denote compassion, which doesn't mean a half-hearted "Ok, whatever works for you." Rather, we should try to think not from our own position and our own experiences, but rather from the standpoint and experiences of another.
Obviously the outcome of this sort of stance--whatever we call it--toward others is not total acceptance of all views and behavior.