There's some more details about this one in today's Times:
How internet turned ‘fact’ into a global lie - Times Online

Basically, it was your standard misinterpretation-turns-into-fact rumour.

There's a good point at the end of the article:
Perhaps because of our increasing reliance on the internet for finding out factual information, news and gossip, many claims made in such e-mails go unchallenged. Their very pervasiveness makes them credible.
Absolutely.