This is a RUSH transcript from "The O'Reilly Factor," June 10, 2009. This copy may not be in its final form and may be updated.

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BILL O'REILLY, HOST: In the "Miller Time" segment tonight, let's get right to the vicar of verbosity, Dennis Miller, who joins us now from Los Angeles.

All right, Miller. You just heard Ellis Henican and I go at it. And then you heard the Muslim assassin say that Islam told him it was OK. What say you?

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DENNIS MILLER, FOX NEWS CONTRIBUTOR: You know, I don't get "The Taking of Ellis Henican 123." I just don't get it. This is what a demented cluster setup it's turning into in this country, is that Air France can now say that there were two guys who were declared a fatwa on France on the plane, maybe. Pakistan, they're shooting up luxury hotels. Laura Ling in a work camp in Northern — North Korea, due to this demented guy. And we can't even name a terror act over here. Think of it as a hate crime, Ellis. The guy killed one of our guys in this country. He even said it. I don't know how he's on AP getting interviewed. But even he, although he came short of remembering that the thing that is causing him to kill is called Sharia Law, he killed him because he didn't agree with him politically. And you cannot get them to even cop to that. It's maddening.

O'REILLY: Well, I think the basic thing is why the American media ignores the Long story, downplays it. And I think it's just obviously they don't — they don't want to confront what you just confronted: worldwide terrorism. The left-wing media doesn't want to hear about it. And if they do, they blame it on the United States.

MILLER: Well, listen, they'd better start confronting it. I just ticked off three things that should set a big alarm off. We're worrying about three fat guys in beards that we waterboarded six years ago. We're going to lose this. We're not even the weak pony anymore, the weak horse. We're the Shetland pony, and we best wake up.

O'REILLY: All right. I agree 100 percent. Now, this is a very important story. The Bremerhaven Zoo in Bremen, Germany, has imported four female penguins from Sweden who are supposedly, allegedly gay. I guess they're lesbian penguins. Because the Bremen Zoo wants to see if they can persuade them to go straight. It's an enormous story in Europe, Miller. What say you?

MILLER: It's hard to believe the Germans aren't flexible about this, because over the years they've — you know, they're an open tent over there. I don't know much about gay Henicans. I'll say this. Or gay penguins. Sorry. Don't want to go crazy. I'm thinking about Trenchen (ph) Handmaiden, the guy before. But if a couple of gay 'guins want to swap a little beak in Germany, I could care less.

O'REILLY: OK, but see, I can't figure out how they would know the penguins are gay?. How would you come to that conclusion? Do they wear tight T-shirts? I mean, what do you — how do you know? I don't know. What's the barometer here?

MILLER: A couple things, Billy.

O'REILLY: What?

MILLER: A couple thing. Their sex is very formal, the gay penguins. And...

O'REILLY: How is that formal. What do you mean by that?

MILLER: Well, they wear the black and white. They wear the black and white.

O'REILLY: They wear tuxedos.

MILLER: Yes. And also, when they do have an egg, it's already pre-colored, which, you know, that sets off some alarms.

O'REILLY: I don't know — it's — I don't what's happening to our society, Miller, which is why I'm discussing this with you. No. 1, if the penguin is gay, leave the penguin alone. God made the penguin that way. And I agree. I mean, I'm not one of these guys that thinks you should be converting anybody to anything. If you're that way and you're not hurting anybody, I think you and I agree on that. We're libertarian on that. Who cares? So why is the Bremen Zoo trying to make these penguins straight if, indeed, they are gay? Why bother? You know what I'm talking about? If they're happy, they're happy. That's my philosophy here.

MILLER: When did you turn into such a reflective "CYA" guy?

O'REILLY: It was after Deepak Chopra.

MILLER: The politically correct thing on penguins. What, are you kidding me?

O'REILLY: That's exactly the way I feel about it. I think that the penguins are happy being whatever the penguins are. Why take them from Sweden to Germany and try to mess around with them? Just leave them alone.

MILLER: Because they're pre-op transsexual penguins coming from Sweden. That penguin there is the Christine Jorgensen of penguins.

O'REILLY: Is that right? You knew the penguin when it was a male?

MILLER: And now it's traveling under the penguin name Dr. Richard Raskin (ph).

O'REILLY: This is not made up. Miller and I are talking about, actually, something that's happening right now in Europe.

Now, for some reason, the D-man wants to talk about Katie Couric, who I like. I've known Ms. Couric for many years, a nice woman. And I think she was unfairly treated when she took over the "CBS Evening News." But what do you want to say about her?

MILLER: Well, I want to say I read the whole speech, and I enjoyed the speech.

O'REILLY: Which speech was this?

MILLER: It's a pyrrhic victory — she spoke at Princeton's grad day ceremonies. This is a pretty clever speech. Pretty good intentioned. Pretty well-intentioned. It's a pyrrhic victory though that she's having with Sarah Palin here. I know she's over there in the Rick Kaplan bubble, and they're using the rationalization slag role to tell her that non-compromising journalism can equal diminution in ratings, and she might buy that. But at the end of the day she's got to realize now this is a pyrrhic victory, her wading in on Palin, because people think she's overplaying the hand. She is now the lowest-rated prime-time newscast since they've kept ratings of prime-time newscasts. They're going to tell her that's good. I can hear Kaplan saying, "That's because we're unbending. It's no holds barred, baby. This is the price you have to pay." But somewhere along the line she's going to have to think, wow, seven million people a night are watching the other guys, and only five million are watching me.

O'REILLY: Well, we actually beat her. "The Factor" combined audience at 8 and 11 actually beat her last Thursday, which is rare because obviously they have a bigger reach. But what was it that offended you about what Ms. Couric at Princeton said about Ms. Palin?

MILLER: I wasn't that offended. I'm just saying to her, like I said, I met Katie Couric a few years ago. I don't want to get into this thing like where I end up hating her over politics. I don't hate her. I'm just saying this is a misguided play, saying stuff like, "I can see New Jersey from my home." Palin is not as stupid as she wants to pretend.

O'REILLY: No, I agree.

MILLER: In the bubble, in the bubble over lunch at Michael's, yes, she's the stupidest twit in the world to those people, but that's a red badge of courage in the center of the country where she has to draw her viewers from, and they are starting to think, "OK, let it go. You don't have to travel across country to pick up honorariums from juko (ph) colleges like you're the new Ariana Filatchi (ph). Let it go. You tripped her up because somebody in a production meeting said, "Ask her about another Supreme Court case." And she might trip herself up. She did. Do you think Biden would have had an answer to that? Do you think Biden has looked like a genius since he's been in? None of them are geniuses. And I think Katie is doing herself a disservice going after Palin. Short-term gains in the bubble of Manhattan. Long-term, Les Moonves — I don't care how much they talk about good journalism, Les Moonves will whack her eventually if she doesn't get some viewers.

O'REILLY: All right. And talking about Sarah Palin, stick around, because David Letterman went after her. And now the governor is striking back, and so that's next. Miller, as always, thank you.

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