I think part of the problem is when people start trying to put an android mod on a non-google phone.
Much like HTC would be well within their right to send similar C&D letters if someone was cooking ROMs with Sense UI in it.
I do think its a bit silly of Google to go about it this way, as some of the apps they are upset about seem like some of the most basic apps native to any google phone.
Someone somewhere else mentioned that it rooting and adding new ROMs were for the nerdy/geeky type that liked that sort of thing. I think its a bit more wide spread than that, just based on all the folks I have seen popping in here with the whole, "Hi, Im new to android, non techy and want to root. By the way, what does root mean" sorta posts.
If anything. Google should have offered Cyanogen a job, or worked with him and the community to give him the tools do to what he does without infringing on the apps, but instead, I bet they just end up "borrowing" some of the tweaks.
edit:
LOL You beat me to it Scorch.. maybe if I wasnt so long winded, but yea, they shoulda hired him.