The ultimate issue I believe was down to use of Apple copyrighted icons. As with any copyrighted media (images, audio, video, documents etc) the owner of the media has the right to stop unauthorised users from using them.
Whilst it may see over the top, certainly with the regard to trademarks, if a trademark owner fails to enforce their trademark then they can end up with an unenforceable genericised trademark (http://en.wikipedia....cized_trademark
If someone decided to write their own CameraAware application (calling it CameraWarez or something), copying the application's icons and layout, and distributing it for free - I'm sure Modaco might try doing something about it. Maybe it might be a skin/add-on for TomTom (I know, TomTom doesn't have skins!) which gives the same layout and icons as CameraAware.
Or maybe the other way around - if CameraAware had used icons taken from TomTom - I'm sure TomTom would have tried to enforce the copyright issue.
I agree that it sounds very heavy handed - however, they're not doing anything wrong - they have the sound legal justification that the icons are their property (not to mention being used on 'competitor' devices). MS themselves is not unknown for employing similar style tactics on occasions.
I've no idea about whether the copyright covers layout/design etc - and whether using your *own* icons layed out in the iPhone style would be okay - but certainly, the images I've seen showed Apple icons being displayed without Apple's permission, and copied around. Reporting the information is one thing, providing a link to the source is a grey area, providing screen shots is certainly an issue.