Islam4UK is a proscribed group in the UK. This means that the group is considered a terrorist organization. To openly associate with the group, or to wear clothing advancing the group, is a prosecutable offense. Being an open member of this group is openly supporting terrorism, according to UK laws. It would be stupid of them to publicly show their faces and invite arrest.
Yes, Islam4UK did the right thing by canceling, because that was not the appropriate place to have a protest. If Islam4UK wants to stage a march, they need to pick a place that is not so controversial. Islam will not make any friends if they cannot find a way to practice their religion peacefully without offending others.
Islam4UK's protest march would have just exacerbated an already tense situation. The so-called terrorist organization has a right to march and protest for Muslim rights in Britain, but leaders of the group knew a march would have been problematic before they scheduled it. Perhaps the only reason Islam4UK did that was to have headlines in the news media.
Yes, Islam4UK did the right thing by canceling its protect march in Wootton Basset, because Wootton Basset is a very small town for something that controversial. Something that political in a small town like that could be very upsetting for residents. In addition, if the march were held in a place like London, there might be more like-minded people available that would be interested in attending the protest.
Islam4UK canceled its protest march so as to not enflame an already tense situation. Britain sees the group as one with ties to terrorist organizations. Peaceful protests by members of mosques throughout the UK is one thing. A known terrorist group drawing extra attention to itself is quite another. Islam4UK did the right thing by backing down.