No, it's not compatible with Traditional Catholic dogma. Vatican II's definition of religious freedom is a heresy, that one can worship God any way he or she so chooses. That's like what the Protestants believe. You cannot worship God any way you want. This statement from Benedict is a load of garbage.
The last line of his statement also appears to be saying that a person can choose any political path they want. That's not correct. If a politician becomes enrooted in liberalism and supports abortion and/or gαy marriage, they are in sin. This is why Nancy Palosi, Joe Biden, and Harry Reid have automatically excommunicated themselves from the Church, you cannot be Catholic and support this evil junk!