The problem with this case is that the RIAA has deep legal pockets, the family doesn't. RIAA had already broken the mother (even with the support she got from others), so the kids wouldn't have the finances to fight for long.
I expect RIAA was hoping that was the case, because then it would be settled out of court. Why is that important? I think a court ruling would have gone against them. As many have mentioned, statute of limitations, age at time of illegal file sharing, etc. What the RIAA has now is a psuedo-precedent. They can point at this and say, "See, this is the precedent in this kind of case" and the media will not only buy it, but spread it. It is NOT, however, a legal precedent. That only comes through a decision handed down by a court of law.
RIAA's tactics are, I believe, purely scare tactics. They made no money on this (their legal fees must have been staggering), set no legal precedent, but they will get a lot of media attention - especially on a slow news day. I don't like how they handle things - I would call it mafia tactics - "pay us what you owe us, or we break your hard drive".
But please, keep in mind that people who illegally copy and distribute music, movies, etc. are not modern day Robin Hoods, stealing from the rich to give to the poor. For example. if my neighbour has a veggie garden, and I steal all of his produce and give it to the food bank, it is still stealing. My not making money off of it, or not using it myself, doesn't mean I didn't take something that wasn't mine, and in our legal system, that's a crime (the question of whether it should be a crime is a whole different discussion). What I can do is try to persuade my neighbour that he should give some to the food bank.
If I don't like the music industry's way of doing business, my most persuasive act is to not buy what they make - and I generally don't. I pretty much quit buiyng CDs years back because I already have more music than I can listen to in a few months - and it's music I enjoy.
The challenge is, RIAA wants to claim their financial losses are solely based on piracy. The only way we can prove them wrong, and show them that it's their services and products we don't like, is to quit file sharing music long enough for them to keep losing money at a prodigious rate without any piracy going on. Then they will be forced to change their business model, without the excuse that "the pirates made me do it". Can we, as a society, do that? I don't think so, as long as the files are "free" for the taking. It would take a lot of character and moral fortitude for such a small thing.