>For example, if you own a bookstore and carry a book that says something defamatory, you can be held liable if you don't remove the book after being informed about its contents.

I don't think you can in the US. Maybe elsewhere, but in the US AFAIK the author is responsible for the content they publish, not the bookstores carrying the books.

>This means that if a platform knows it hosts illegal or defamatory content and doesn't take it down, they aren't liable and any legal cases against them will get thrown out due to 230.

No it doesn't. Section 230 doesn't allow sites to host illegal content, of course only "legality" within the framework of US law matters.

All it says is that the liability for user posted content lies with the user posting the content, not the platform hosting it. Which to me seems appropriate.