While scary, I think such a system is a long ways off. It's one thing to siphon raw bits flowing through an IXP for later analysis, and another entirely to censor specific pieces of content based on keywords(assuming of course you can't or don't want to simply censor entire domains). It would require a pretty cozy relationship between government and telecoms(already in place in some countries, of course) in the form of some staff to keep afoot of new content that may need to be censored. Automating that part implies that the government would have a list of sensitive, potentially damning subjects that are not publicly known in order to preemptively censor them.

Replacing that content with propaganda would be even more complex(and potentially vulnerable to discovery).