Yes, what the city transit agency does is state action. I don't understand whose right to free speech you think is involved, other than this woman's organization. What government entity in this case has infringed the free speech of any Muslim, and how?
Nothing in the First Amendment protects private persons from being offended by what other private persons say. I didn't see any statement in those ads that was false. If some Muslim doesn't like having it pointed out publicly that parts of the Koran condemn Jews, that the Mufti of Jerusalem was thick as thieves with Hitler, that CAIR and HAMAS are creations of the Muslim Brotherhood, and so on, too bad.
I would ask what anyone thinks this "advertisement" is supposed to accomplish...
"THIS TYPE OF MURDER IS BAD!"
One of you will end up here next!