For the most of things I'm totally agreed with you. There is only one thing I can't accept: your statement about the severity of the penalty.
On my opinion it was just as bad as what they did. May be you're taking an account the amount of punished players, but the amount of affected players can be vast. Look at that scenario: one guild started to rise in power by the superiority of it's equipment. The guild conquers all the castles and all other players has to pay them. In 4 and 5 Tier you have some choice, but for 6 Tier there is no shops outside the No Man's Land's towns. Not to mention the terror that guild is capable to apply to all in any battle zone.
The yellow and purple recipes obviously are designed to be unique (legendary costs a 50 to 60 diamonds, epic a just a global drop)... just a few players to vaunt about... not to craft an epic sets from them. This shifts the entire balance of the game play.
In the real world you can produce and sell drugs... witch you know is illegal. The government can't stop you from doing that - it can only punish you IF the DEA (or whatever agency) catches you. In games in general (not only in IH) exploiting the bugs is prohibited as this breaks the balance and makes the world unfair. The real world is unfair by default, so may be that's so many people are playing games.
I hope the example of the last punishment will last enough to prevent new exploiting of other bugs in the near future. The far future is too far to remember
One more thing - the breakage of this beautiful IH world from the crew definitely deserves if not punishment (as we can't see that) at least some refund or something like.