According to this post on sluniverse.com (via this post on the Second Life Herald) some people of the libsecondlife team indeed have been very aware of the consequences of their actions and it hints that they even made the step to demonstrate CloneBot to the wider public deliberately.
Now I should nevertheless state that I am not a big fan of posting chat transcripts to the public without the consent of the people participating in it. It’s sort of a copyright/privacy breach on it’s own and should be condemned.
But it’s out now and it might endager the existence of the Open Source project libsecondlife. Nevertheless I don’t see any hint of using it for copyright infringement but more as educating content creators the hard way. And indeed the result can be seen as devastating and indeed puts the whole libsecondlife project into a bad light.
The team has drawn consequences though and they have banned Baba Yamamoto from developing further on the team (while Nimrod Yaffle was never on it) as this blog post on their homepage explains.
Update: Apparently much more reorganisation is going on and the heads of libsl have stepped back now. They say the project is not dead and indeed has lots of influx of new users. So we will just have to wait what will happen now.