Difficult question. Obviously it would be gross to most of us. But the mechanism that causes us to not bang our siblings is our familiarity with them in our home at a young age, so if they grew up together they wouldn't have that repulsion, besides what was morally ingrained by society and, speaking objectively and not just about this particular issue, it's dangerous to punish people for not conforming to societal norms.
I do find it wrong to legislate morality, but if the kids actually had a significantly increased chance of significantly life-affecting abnormalities proven by several large scientific studies, then yeah, law against it. I don't know if those studies exist or if this is one of those things we've observed over time and come to believe. I understand the idea behind the genetics, but I don't know if one generation really has significant effects much of the time or if that's something we see in communities where people are relatively isolated and this happens over a few generations (some Amish communities, for example, display genetic mutations from lack of gene pool variation). But then who's to stop these kids' kids from happening to fall in love and getting married, and so on? The odds are low, sure, but in this particular instance if they KNOW mom & dad are brother and sister, it may not seem abnormal to them, they may even aspire to be like mom & dad...plus the whole getting taken away from their mother thing may lead to another generation of siblings who didn't have that "ew sibling" experience of growing up together. So honestly I don't have enough information to decide it should be illegal, no matter how disgusting society may find it.
In this case it's a bit reprehensible that a 25yo man fell in love with a 17yo girl, and she's probably not the only one with mental issues if he intentionally was going to meet his blood family and once he got there decided he wanted to have sex with this young girl who is in fact his sister. The "omg don't bang sister" instinct from childhood wasn't there, but he was going there in order to meet his blood relatives...he shouldn't have tried to hook up with any of them, especially one 8 years younger with mental disabilities.
I also feel sad that 3 kids got taken away. How could she be an unfit parent to 3 of the kids but okey-dokey for the other one? Either she's too bad of a parent to raise kids or she is okay to raise kids. Doesn't make sense to say "oh she'll do okay with this one, but not the others, she'd screw them up so bad there's no hope for parenting classes or anything, we just have to take them away." Also kids taken away from their parents rarely do better in foster care than with their own parents in the first place, unless said parents were actually abusive (and not slightly negligent or "off").