Bitcoins, as a new invention, are causing lots of confusion. Bitcoins are not issued by any government so banking institutions may be unsure how to handle them in context of banking regulations.

Banks may over react and close accounts to be on the safe side. In fact, that happened to MtGox's bank in France a year ago I believe, but MtGox sued and had their account reopened (I think they later switched banks anyway).

The first thing to understand is bitcoins are not illegal. Guidance issued by FinCEN (Financial Crimes Enforcement Network, a bureau of US Dept. of the Treasury) pertaining to virtual currencies, and seemingly Bitcoin in particular, specifically says users that trade virtual currency directly for goods/services are not subject to regulation. This is generally taken to mean using bitcoins in legal ways is fine. There is an entire industry springing up around Bitcoin, including a possible stock exchange listing.

So a bank saying it's against their rules seems to me overly cautious.

If you're willing to take the time it may be possible to have your account reopened, but that outcome is not guaranteed. The easiest thing to do I think is simply open an account somewhere else and don't use it for anything directly bitcoin related until these issues become clearer. There are other ways to buy/sell bitcoins with localbitcoins.com usually available if nothing else. BitInstant.com is also a popular way to transfer money into Bitcoin exchanges. More options are in the works.