"It isn't a bank password" well, yeah, and that's why nobody is going to jail and just having their acheivements wiped and a mark put on their online record. A virtual gaming punishment for a virtual gaming crime. Pretty much a measured response.
That said, I have to wonder about part of the justification for this. To be entirely honest achievements glitch on the 360 all the time. When I was trying Bully and doing the various class mini-games I wound up totally missing out on an earlier achievement (for doing so many classes) but getting one for doing more classes. Someone looks at my gamer tag they could say "OMG, Thorley 231 cheated, he couldn't possibly have that acheivement without having the earlier one", when in reality it was just a bloody bug where I actually wound up getting cheated out of an achievement actually (I know about this, but I'm not a big enough acheivement hunter to care all that much).
They investigated this pretty well, but I'm not sure if I like the "out of order" part of this because as I said, I've had problems, and I know plenty of people have talked about games rewarding achievements wierdly over the years (either for the wrong thing, out of sequence, or whatever). Earning online achievements offline is the big part of course, along with the data transfer, but it still raises some eyebrows here.
At any rate, it's good to finally hear this has been resolved. If the kid has to re-earn all his Cheevos (thanks for the term Kathleen, it's pretty funny) anyway, if the mom cares that much and is willing to go through all this effort, she might want to invest in a new system and perhaps hope a lesson has been learned about cheating.