BBC director general Tony Hall said an outright ban of the Ding Dong record on Radio 1's chart show would have given the track more publicity:
I understand the concerns about this campaign. I personally believe it is distasteful and inappropriate. However, I do believe it would be wrong to ban the song outright as free speech is an important principle and a ban would only give it more publicity.
I have spoken at some length with the Director of Radio Graham Ellis and Radio 1 Controller Ben Cooper.
We have agreed that we won't be playing the song in full, rather treating it as a news story and playing a short extract to put it in context.
Mark Biddiss, who started a social media campaign to get Ding Dong The Witch Is Dead to number one in the charts, said buying the song was "a very cathartic experience for a lot of people who feel that for many years they haven't been listened to".
He was joined on ITV's Daybreak by former Conservative MP Jonathan Aitken who said the song, which is on course for a place in the top five in Sunday's Offical Chart, was a "pretty feeble form of protest".
Director General Tony Hall is quoted as saying that while he thinks the campaign to make the song top the charts is "rather tasteless," the choice of whether to play the song on air is for news editors to make.
Supporters of Margaret Thatcher, including former Conservative treasurer Lord McAlpine, have expressed outrage that the possibility is even being considered, saying it is a matter of taste.
Speaking about the redacting of material from the BBC transcripts released today, acting BBC Director General Tim Davie said this has been done following advice from external lawyers and not to protect the BBC:
In one email headed "Jimmy Savile - paedophile", BBC producer Meirion Jones, who was involved in establishing the axed Newsnight report, flagged up the idea of an investigation just hours after the presenter's death was announced.
He proposed the suggestion, possibly for Panorama, because he said some of the girls who had been molested by Savile were ready to talk about their experiences.
He wrote: "Some of the girls are now prepared to talk about this which might make a core to a film about what Jimmy Savile really got up to - and of course he's dead so he can't sue."
His emails also contain vivid transcripts of the sexual activities in which girls at Duncroft approved school - where Savile was a regular visitor - were encouraged to take part.
He said in statement: "These documents paint a very unhappy picture, but theBBC needs to be open - more open than others would be - in confronting thefacts that lie behind Nick Pollard's report.
"A limited amount of text has been blacked out for legal reasons, but no one could say that the effect has been to sanitise this material, which again puts a spotlight on some of our failings. We need to acknowledge these shortcomings and learn from them."