I'm not a big advocate of piracy, but this is a bunch of crap.
Yes, let's fill prisons that are already overcrowded with people who sat behind a computer and stole music. What a load of crap.
You want a real punishment? Give them the Kevin Mitnick treatment. If they touch a computer for 3 years, THEN they must pay restitution for all pirated music/movies, their wages WILL be garnished until the amount is paid in full with intrest from the first date that they've been known to have been in possession of the material. This, on top of intense community service and whatever else a judge can think of as punishment that doesn't require wasting taxpayer resources.
As far as the wiretapping and aparent spying, I think warrants should only be issued for persons suspected of stealing more than, say, $25,000 of material or profiting from the theft. Stealing music is one thing, but selling it is downright evil and if you do that, I hope you f'ing die a horrible death.