At the risk of stating the obvious, there has not been an Olympics in modern history that wasn't political in nature. The games are a celebration of the entwining of sport and politics. The competitors represent countries, not themselves. The games are a public relations marketing bonanza for the home country. The Soviets, for one, used the games as a means of justifying their inferior political system to the world.
United Nations Secretary-General Ban Ki-moon has now voiced his opinion cautioning against any mingling of the Olympics with politics. I doubt few people expect any real honesty from the leader of the UN anymore, but without politics, there are no Olympic games as we know them. Calls are growing for President Bush to not attend the Beijing games, but without the involvement of the world's politicians, why not just cancel the games? You can't have one without the other. Boycotts and political protests are common for no reason except that the Olympics are so thoroughly political and probably couldn't continue to be held if all vestiges of politics were somehow forcibly removed.
When Ban advised against mingling politics with the Olympics, he meant there should be no unsanctioned politics. The unstated undercurrent:
Politics are acceptable when introduced by the Olympic Committee, the host nation, or by other nations of sufficient magnitude (the US, Russia, etc.) that the politics is part of the power interplay between that country and the host nation.
Unacceptable politics is that introduced by "non-state actors" such as the Free Tibet activists. Their politics serve to undermine those on the acceptable list and diminish their power, and that's what it's all about--who has the power and the right to use it, and who doesn't.
Not only are the games irrevocably political, they are also religious. Christian church representatives have traditionally boycotted the ceremony of the lighting of the Olympic flame for the summer and winter games because a prayer to the pagan god Apollo is invoked.