I might have a seriously bent moral compass but I am not sure where the big problem is. The way I think about things is that expansion through creative means should always trump the concept of copyright and patent. Essentially this is my thought process.
Buying a game to support development [Good], Paying blizzard to play on Blizzard servers [Good], Modifying code to play on own server [Good], Modifying code to play on Blizzard servers for free [Very Bad], Allowing others to connect to own server for free if they have paid for their own game discs [Good], Creating additional content for an existing game [Good], Charging for content you created [Good], Charging for content you did not create [Very Bad].
From this perspective, as long as everyone is in ownership of original game discs and the server is privately run, and only originally made content is part of a micro-payment system then there shouldn't be an issue.
I agree that it is a violation of a company's licensing agreement but that is something that can usually only be read in full usually after buying, opening, and installing a game, at which point in most places it cannot be returned or refunded, therefore creating a one-sided agreement. That would parallel to agreeing to a strip search upon entering a building because of the sign on the far wall opposite the door.
The part I don't understand is the lawsuits, if people have a demand for something why not supply that demand? Instead of wasting time, money, and resources on lawsuits for media attention why not use the private server model as a ground for scouting consumer trends then incorporate your findings into your intellectual property and make more profit? Lawsuits just seem to me like blizzard is crying over someone making blinky swords and telling court to beat them up instead of making their own bigger better blinky swords and getting both the profit at the same time drawing attention away from those trying to detract from intellectual property. Wouldn't everyone then win?