End state...they should have known this would be very high-visibility. Several players fumbled the ball before the whistle blew. Primarily the WH military office, but also the NYC public safety officials. I give the FAA a pass, because their considerations are safety of the airways, not PR. Either one could have sounded off at the fact that this could be a huge fiasco, and that at a minimum, the public should have been notified of what was happening in advance. If security considerations for the plane wouldn't allow notice to be given, the event should have been scrubbed. If they wanted to fly the plane by a cool-looking backdrop, I'm sure Mt. Rushmore wasn't booked.
While I don't think I would have gone into a state of panic at the sight, I definitely see the point of view of those NYers who did. 1000-1500 feet is really low for a 747, and the markings would not necessarily have been readily distinguishable. Even the F-16 escort could have made one MORE apprehensive, not less. Having a shot-down jumbojet plunging into Manhattan is kind of a scary possibility, too.