Well, aside from finding that particular picture rather unsightly because of the hair, as far as Instagram is concerned I would only agree with removing such things on the argument of such poor grooming making it difficult to properly judge if anything actually obscene might be peaking out somewhere.
As backwards as it it is, an even more revealing picture that involved a skimpier outfit could reasonably be deemed more appropriate if cleanly shaven. It's not that it's actually any more or less appropriate, it's just a matter of handling the review process. Cleanly shaven allows one to very quickly and at a glance determine suitability. A messy muff requires a much closer examination for adequate review, and thus might be more convenient to simply set a policy forbidding it.
Anyways, with that particular picture I can't really see the problem either way, it's not nearly close enough to borderline to merit even such a weak argument.
But, on the grounds of 'ew', I support the decision.