The first goal wasnt offside. The referee's discretion is in deciding to allow play to continue and/or to "authorise" the player to leave the pitch (which would mean that he also needs the referee's authorisation to return).
Section 11.11. of FIFA's Advice to Referees:
11.11 DEFENDER LEGALLY OFF THE FIELD OF PLAY
A defender who leaves the field during the course of play and does not immediately return must still be considered in determining where the second to last defender is for the purpose of judging which attackers are in an offside position. Such a defender is considered to be on the touch line or goal line closest to his off-field position. A defender who leaves the field with the referee's permission (and who thus requires the referee's permission to return) is not included in determining offside position.
The interpretation is there to avoid the possibility that a defender caught in extremis will go to ground (or even just step over the end line) in an attempt to put the attacker offside.
Which has actually happened (and I bet you wouldn't need three chances to guess where).
This particular incident seems a rather harsh application of the interpretation, but it is worth pointing out that from where I was sitting it looked as if Panucci was deliberately trying to get the ref to blow the whistle. He got up quite quickly after Holland scored.
The referee has the opportunity to use his discretion by blowing his whistle and stopping play and/or authorising the player to leave the field. In fact, it would seem to me that the ref should blow the whistle if he believes the player really is "pole axed" both so that he can get treatment immediately and because the injury gives the attacking team an unfair advantage.
Frojdfeldt chose not to exercise that discretion in this particular instance, but that doesn't mean he didn't have any.
As expected, Donadoni is getting crucified in the press, but appears to be sticking to his guns, even going so far as to say that he didn't think that Italy had played particularly poorly.
The Romania match is now a heck of a lot more interesting than it looked to be 24 hours ago.
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