I think that retouching should be aloud but clearly and obviously stated that photoshop has been used. Not only does this cause women and teenagers to feel insecure, and could cause problems with self esteem and eating habits, it could also be seen as false advertisement. Ever seen mascara commercials? Their eyelashes are impossibly long. Why? read the tiny print in thee corner that tell us that eyelash extensions have been used. What about Red Bull? Doesn't actually give you wings does it?
BUT on the other side, what about when women wear makeup? Isn't that the exact same thing? It is used to make your skin look flawless.