Yeah, I think it is kind of alarmist too. Before I bought my first reader, a K2, I read about this and was shocked & alarmed too. But then, I educated myself on the circumstances. It seems OK to me. Amazon was basically forced to do this.
I'm not aware of how it all played out in the end: Are those George Orwell books still unobtainable for Kindle? Or was the copyright issue worked out and folks can now re-purchase the books?
It is worth noting that Amazon did credit the users' accounts after removing the books. It isn't like someone's life was depending on those books, or that it was a widespread problem. I do understand that it is kind of big-brother-ish for them to be able to do this. Kind of 1984-ish, hehehe.
Still, we're glad you're happy with your decision.