Ed Cone, you're right, this is a great example of how to hurt your brand name. I spoke to a group of MBA students in Silicon Valley and most had heard of how Dell had treated Jeff Jarvis and they thought less of Dell for how they responded.
Picking on bloggers isn't smart PR.
Why not? Well, now I'm thinking of not going to Pop!Tech, which is held every fall in Camden, Maine. I wonder if other bloggers are doing the same? Every attendee brings thousands of dollars to the local economy there and high-reach reporting about Maine's tourist attractions (most of the people in the audience are executives, VCs, press types, or bloggers).
Update2: Mike Arrington of TechCrunch is even more disgusted with this lawsuit than I am (and he's a lawyer).