The arguments for/against water fluoridation are a bit more complicated than that.
It is definitely neurotoxic in high quantities, but the amount added to water is pretty minimal. Water naturally has around 0.4-0.5 mg/L, and typically the standard treatment is to bring it up to 1 mg/L, so they usually add about 0.5.
First, although the initial study claiming fluoride reduces tooth decay was indeed scientifically flawed, most studies done afterwards have confirmed that tooth decay is significantly lower in areas with fluoridated water. Most researchers seem to agree that there is a benefit there, including many who link it to other adverse effects.
Is this benefit coming at the cost of lowering IQ? I don't think there is a real consensus yet, and a lot more studying needs to be done. Many studies have shown no correlation to IQ, and many have shown a correlation to decreased IQ.
The paper cited most pointing to a correlation with decreased IQ is a meta-analysis of 27 Chinese studies performed by Harvard researchers:
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3491930/. This is the paper that Mercola and every other Google hit for "adverse effects of fluoride" refer to primarily.
These studies looked at natural Chinese well water (and other traditional water sources used in rural communities), where fluoride levels range from 3 - 11.5 mg/L, which is significantly higher than what the US government specifies as the maximum allowed for drinking water. They also admit that most of the studies they looked at had missing information, control flaws, and other experimental deficiencies. However, since there were 27 different studies, the flaws can be averaged out to an extent, so their findings are still significant. They did not make any claims that 1 mg/L is an unsafe fluoride level or over what the limit should be. Due to lack of strong controls in many of the studies, it's also possible other substances in these rural communities' water is affecting IQ, or amplifying fluroride's effect.
I think it is quite possible that researchers may eventually conclude that even the relatively low level in US drinking water impacts IQ in children, but at the moment the evidence is not strong enough to support that with real confidence. It definitely needs to be studied more.