The libraries are happy to get the federal funds with no strings attached, but it appears to me that the reasoning of the opinion actually forbids the public libraries from doing internet filtering (regardless of federal funding). Libraries have pragmatic reasons for filtering, and they will be unhappy if they cannot do it.
The core of the court's opinion is that it is impossible for a porn filter to be effective. The argument doesn't make much sense to me. No spam filter is perfect, and yet people use spam filters all the time. Millions of people also use porn filters of various sorts. For example, the default settings on Google searches use a porn filter.
The opinion gives some examples of pages that were blocked by commercial filters that perhaps should not have been blocked. But there is no explanation as to why the sites were blocked. It might have been a bug in the software, or the site might have previously had some offensive material, or there might have been some subtle double entendres on the page. Some of the pages I could not get to even without filtering software.
Similar reasoning would conclude that judges are ineffective and useless. Judges make bad decisions much more often than the filtering software!
This case is headed for the Supreme Court, but they may just make more of a mess of it. The core problems here are that the feds should not be funding libraries, the money should not have weird strings attached, Congress and the President should seriously the constitutionality of a law when they pass it (instead of passing the buck to the courts), the courts should not decide hypothetical questions, etc. While I think that the CIPA was a lousy law, this court decision isn't any better.